British pound climbed to session highs against the US dollar on Tuesday, as activity in the sector of services in the United Kingdom expanded at the fastest pace in 16 years in the month of October.
GBP/USD rose to a session high at 1.6062 at 10:05 GMT, after which consolidation followed at 1.6053, gaining 0.53% for the day. Support was likely to be received at current session low, 1.5950, while resistance was to be encountered at October 31st high, 1.6068.
According to data by Markit Economics in cooperation with the Chartered Institute of Purchasing and Supply (CIPS), activity in the sector of services in the United Kingdom increased at the fastest pace in 16 years in October, which suggested that economic recovery has gained strength in the beginning of the final quarter of the year and also this result came in consonance with the preliminary value of nations Gross Domestic Product in October, as the latter grew at the most considerable pace in three years in Q3. The index, gauging performance of the services sector, advanced to a reading of 62.5 in October, the highest point since May 1997, from 60.3 in September, while expectations pointed a slow down to 60.0 in October. Employment in the largest industrial sector of economy, namely the services, climbed to the highest level in 16 years. The sub-index of new orders rose to a value of 63.4 in October, after it stood at 60.6 in September, as this marked the fastest inflow of orders since the beginning of the survey back in July 1996.
“This underlines the resilience of the U.K. economy,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London, cited by Bloomberg. “This is supportive for sterling. It makes sense to sell the euro against the pound.”
The above mentioned data came out one day after it became clear that construction PMI in the United Kingdom rose to a reading of 59.4 in October, or the highest level since September 2007, as in September it stood at 58.9.
In addition, the National Institute of Economic and Social Research (NIESR) said on Tuesday that UK economy will probably expand 1.4% during this year and 2% in 2014, or a 0.2% increase in institutes forecasts for each year. Rising home prices are expected to influence in a positive manner consumer spending in the country, according to NIESR. However, economic recovery, supported mostly by consumer demand, might appear to be imbalanced.
The Confederation of British Industry (CBI) also revised up its forecast for UK economy and now suggests an expansion of 1.4% during 2013 and 2.4% during 2014. The CBI had projected a 1.2% growth in 2013 and a 2.3% growth in 2014 in August.
The yield on UK benchmark 10-year gilts climbed six basis points, or 0.06 percentage point, to reach 2.68%, after touching 2.69%, which was the highest level since October 22nd.
Meanwhile, the US dollar was put under pressure by comments made by Federal Reserve Bank officials, which indicated that the central bank will probably maintain the current monthly pace of its stimulus for some time.
“Monetary policy is likely to need to remain accommodative for some time so that we can achieve full employment within a reasonable forecast horizon,” Boston Fed President Eric Rosengren, who votes on monetary policy this year, said in a speech in Boston on Monday, cited by Bloomberg. “The economy remains challenged.”
Also, Richmond Fed President Jeffrey Lacker is to take a statement on the labor market in Charlotte, North Carolina today. Earlier in November he said that the probability of another recession was “bigger than we thought.”
Elsewhere, EUR/GBP cross, after having dropped to the weakest point since October 3rd at 0.8403, was still losing ground, down 0.65% for the day to trade at 0.8410 at 12:44 GMT. GBP/JPY pair was gaining 0.21% on a daily basis to trade at 157.82 at 12:46 GMT.