Sterling surges passed last weeks highs

Sterling continued it’s surge against the dollar on Monday after recent PMI data showed that the UK manufacturing sector grew at its fastest pace for ten months in March. Pound/dollar rates peaked as $1.6063 on Monday morning, pushing past the highs we saw last week and held over the $1.60 throughout the day.

The recent data is a positive sign that the UK economy actually grew in the first quarter of 2012 and could avoid slipping back into recession, the news was unexpected, especially as the Organisation for Economic Co-operation and Development (OECD) announced last week that they predict the UK economy to contract during the first three months of the year.

“UK manufacturing has made a brighter than expected start to 2012, with PMI data pointing to output growth of around 0.3% in the first quarter," Rob Dobson, senior economist at Markit, said.

There is more PMI data being released later this week and the general feeling is that if the data continues to beat expectations we could see sterling sustain the gains made over the past couple of days and hold above the $1.60 mark. But many investors could be hesitant about pushing the pound too high considering there is still a possibility of further quantitative easing in the UK.

Many forecasts still show that rates are unlikely to hold over $1.60, depending on where you look some show that within the next six months we will see cable slip back towards $1.52.

This is a 5 % drop from where current rates are and a £200,000 trade could potentially cost you $16,000 if rates fall back to predicted levels. If you would like to discuss the different options available to protect yourself from any adverse movements click here to send me a direct email or complete the contact form on the homepage of the blog.