British pound climbed to session highs against the US dollar on Wednesday, after manufacturing production in the United Kingdom expanded more than expected in September, another indication that nations recovery was indeed gaining momentum.
GBP/USD reached a session high at 1.6118 at 9:35 GMT, also the pairs highest point since October 29th, after which consolidation followed at 1.6095, gaining 0.32% for the day. Support was likely to be found at November 5th low, 1.5947, while resistance was to be met at October 29th high, 1.6144.
Earlier today it became clear that manufacturing output in the United Kingdom increased at a faster pace than projected in September, which facilitated the increase of the wider indicator, industrial production, during the third quarter of the year. The index of industrial production rose 0.9% in September compared to August, after the 1.1% drop in August compared to July. On annual basis, industrial output expanded 2.2% in September, after a drop of 1.5% recorded a month ago. Both figures outstripped expectations. Manufacturing output increased 1.2% in September on a monthly basis, eliminating the 1.2% drop in August, while in September 2013 compared to September 2012 production climbed 0.8%, after a 0.2% decrease in August. This data came out a day after the European Commission published its official forecast regarding UK economy, with nations GDP probably doubling the rate of its increase during 2013. The Commission projects that economy will expand 1.3% this year, which would be the strongest rate of increase among all European economies. UK economy will probably expand 2.2% in 2014.
The above mentioned industrial data came out one day after Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) reported that the index, gauging performance of the services sector in the UK, 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.
On Monday it was reported that the index gauging construction activity 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.
All these data points boosted the view that economic recovery was already gaining traction.
Bank of England will probably maintain its benchmark interest rate at the current record low level of 0.5% and its monetary stimulus target at 375 billion GBP at its policy meeting tomorrow, according to Bloomberg surveys of economists. Additionally, banks Governor Mark Carney is expected to present new quarterly forecasts on November 13th.
Also, the central bank will probably revise up its GDP estimate for 2013 to 1.6% from 1.3% previously, according to Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London.
The yield on UK benchmark 10-year gilts reached 2.72% today, after climbing to 2.74% on Tuesday, which was the highest level since October 22nd.
Meanwhile, the US dollar was still underpinned, after the Institute for Supply Management (ISM) reported that the non-manufacturing PMI for the United States climbed to a reading of 55.4 in October from 54.4 in September, while preliminary estimates pointed a slow down to 54.0 in October. This result indicated that business entities in the country were looking beyond the political impasse that led to 16 days of partial government shutdown and also signaled that a sooner than projected taper of Feds monthly monetary stimulus was indeed possible.
Elsewhere, the euro fell to one-month lows against the pound, with EUR/GBP cross reaching 0.8379 at 9:30 GMT. At 12:42 GMT the cross was trading unchanged for the day at 0.8400. German factory orders demonstrated an unexpectedly strong increase in September, 3.3% on a monthly basis and 7.9% on annual basis. Both results surpassed preliminary estimates. At the same time, retail sales in the Euro zone decreased in September, implying that consumer spending remained suppressed amid record high rate of unemployment and weaker gain in remuneration. Sales fell 0.6% in September on a monthly basis and rose 0.3% on annual basis. The indicator recorded gains in July and August. Such a performance suggested that despite higher consumer confidence, households in the euro region were still passive and inflationary pressure – insufficient.
GBP/JPY pair was gaining 0.42% on a daily basis to trade at 158.74 at 12:44 GMT.
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