Forex News: Pound Rises After Strong U.K. PMI Data

Pound Rises After Strong U.K. PMI Data

(RTTNews) - The British pound strengthened against other major currencies in the European session on Tuesday, after the UK PMI showed an improvement in the private sector for the month of December.

Data from S&P Global showed that the flash UK composite output index was 52.1, higher than the consensus of 51.6 and up from 51.2 in November.

The manufacturing PMI was one point higher at 51.2, well ahead of projections for 50.4, while the manufacturing output index surged 1.5 points to 51.8 in December, a 15-month high.

The UK services PMI business activity index increased from 51.3 to 52.1.

In other economic news, data from the Office for National Statistics showed that U.K. unemployment rate rose slightly in the three months to October. The jobless rate climbed to 5.1 percent in the three months to October from 5.0 percent in the preceding period.

In the three months to October, average earnings excluding bonuses grew 4.6 percent from the prior year, which was slightly faster than the forecast of 4.5 percent.

Including bonuses, average earnings advanced 4.7 percent in the August to October, data showed.

In November, payroll employees decreased by 171,000 or 0.6 percent from the prior year. Compared to last month, employment grew 38,000 to 30.3 million.

Meanwhile, markets expect a Bank of England (BoE) rate drop this week due to weakening UK GDP, declining inflation, and improving labor market conditions. The BoE is expected to cut its interest by 25 bps to 3.75% in its policy meeting on Thursday.

Governor Andrew Bailey was one of those who voted in November on the nine-member Monetary Policy Committee to maintain the Bank Rate at 4.0%, but he made a suggestion that he would reconsider in light of encouraging information about inflation approaching the 2% target.

Investors exercised caution amid a slew of crucial economic data from the U.S., including the jobs report, this week. Data showing an increase in the nation's unemployment rate weighed a bit. Also, the shares are weighed down by losses in defense stocks amid progress in Ukraine peace talks.

In the European trading today, the pound rose to a 4-day high of 0.8762 against the euro, from an early near 2-week low of 0.8796. The next possible upside target for the pound is seen around the 0.86 region.

Against the U.S. dollar and the Swiss franc, the pound advanced to 5-day highs of 1.3416 and 1.0683 from early lows of 1.3356 and 1.0633, respectively. If the pound extends its uptrend, it is likely to find resistance around 1.35 against the greenback and 1.08 against the franc.

Against the yen, the pound edged up to 207.74 against yen from an early 8-day low of 206.77. The pound may test resistance around the 210.00 region.

Looking ahead, U.S. jobs data for November, retail sales for October, U.S. S&P Global manufacturing PMI for December are slated for release in the New York session.

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