As the UK manufacturing expanded more than expectations of economists for last month, the major currency of UK, Pound jumped up to the highest level in last 3 weeks against USD. Apart from USD, Pound strengthened for the 2nd straight day against Euro as well. The yield on the 10-year British gilts increased to the highest level in the last 12 weeks after the analysts made a prediction that the Bank of England will keep the asset purchase stimulus program unchanged. Incidentally, Mervyn King, the Governor of Bank of England will be chairing his final policy setting meeting between 5th and 6th June. Mark Carney will take over the post of Bank of England’s Governor on 1st July.
According to the Chief Currency Strategist of Bank of New York Mellon Corp., Simon Derrick, manufacturing data is strong and it has helped Pound. However, at the same time, everyone is waiting to see what Carney brings on the table. Derrick added that until investors get a clearer sense of what Carney is actually planning for, Sterling will not do anything dramatic in nature. On the other hand, the strong manufacturing data shows that investors don’t need to be so accommodative when it comes to monetary policy.
On today, Sterling reached $1.5376 at one point of time, marking the most since 13th May. Sterling experienced an increase of 1% and it is currently at $1.5354. Against Euro, Sterling went ahead by 0.3% and the same is now at 85.25 Pence per Euro. For the foreseeable future, Pound is expected to trade within the range between $1.50 and $1.53, as mentioned by Derrick. In 2013, so far, Pound has experienced a decline of 2.4%, thereby becoming the worst performing currency after Yen and the Australian Dollar, if the developed market currencies are taken into consideration. USD has gained 4% in the meantime, whereas, the gain for Euro has been of 3%.
As per as the statement of the Markit Economics and the Chartered Institute of Purchasing and Supply, a gauge on manufacturing industries increased to 51.3 in May from its revised value of 50.2 in April. Incidentally, the economists predicted an increase of 50.3; however, the results exceeded the estimates. The 10-year UK gilt yield was more or less unchanged at 1.99%. The price of the 1.75% bond due in September, 2022 is now at 97.975.