A mixed week for sterling has seen a poor performance against the euro offset by a push to a one-month high against the US dollar.
A data-heavy week for sterling saw the release of purchasing managers’ index (PMI) data from a number of industry sectors. The first of these was from the manufacturing sector which showed higher than expected growth throughout January, allowing sterling to make modest gains across the board. Tuesday then brought figures revealing the worst expansion of UK construction output in 9 months – although this was largely overlooked with markets looking ahead to the release of minutes from the Bank of England (BoE)’s latest monetary policy meeting on Thursday. PMI data from the services industry also fell, although in line with expectations meaning sterling was able to make significant gains against the US dollar throughout the day thanks to the growing belief that the Federal Reserve may not increase US interest rates further this year.
Hitting a one-month high against the US dollar on the back of this data, sterling was able to push further until the release of the Bank of England’s (BoE) latest meeting minutes. Unfortunately this showed that the Monetary Policy Committee (MPC) were now united in their belief that UK interest rates should remain at 0.5%. As one member had been voting in favour of a hike for the past six months, this news ensured sterling fell significantly. With the BoE also cutting growth forecasts for the next 2 years, the British currency then fell to a three-week low against the euro, although it was still able to hold onto much of the ground gained against the US dollar this week.
A quiet day for sterling lies ahead, with attention turned to the US for the release of this month’s non-farm payrolls figures.