Sterling gained almost a cent against the dollar during trading today following better than expected UK Manufacturing figures. GBP/USD exchange rates reached a high of $1.5589 following the data release before dropping around 20 pips towards the end of the afternoon. For more information on live market prices and the exchange rates I can offer click here.
Figures released this morning showed the UK manufacturing sector had grown for a fifth consecutive month. The Markit/CIPS purchasing managers' index (PMI) climbed to 57.2 when it had been forecast we would only see a small rise on last months figure of 54.8 (a score over 50 indicates growth).
The data had an immediate impact on the currency markets as the pounds value increased across the board, Sterling-dollar jumped from $1.5543 to $1.5589 to reclaim some of the ground lost towards the end of last week.
So what can we expect this week?
It is quite an important week in terms of data releases for the UK and U.S which in turn is expected to cause some volatility in the FX markets. On Thursday the Bank of England will hold there monthly meeting to discuss their monetary policy. Due to the Forward Guidance that was issued a few weeks ago it is safe to say we will not see any changes to interest rates. What will be key is to see if there is any mention of more Quantitative Easing, it is highly unlikely we will see the central bank add to the current programme on Thursday but if there is any mention of adding to the £375 billion which has already been pumped into the UK economy in the near future we could see the pound lose a bit of momentum.
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On Friday the U.S will release their latest non-farm payroll figures which will show how many jobs were created in August. The numbers will be closely watched as the U.S Federal Reserve are looking for improvements in the Job sector before they begin to taper their huge stimulus programme. If the figures come in well above the predicted number we can expect the dollar to immediately strengthen which will drive down GBP/USD exchange rates. It will also add to the speculation that the tapering will begin sooner rather than later which again will give the dollar extra support.
As I have said on countless occasions the gains we have seen for Sterling in recent weeks could well be short lived. As soon as Mr Bernanke gives the go ahead to scale back the bond buying scheme the dollars value will increase making it more expensive to buy. If the job numbers are positive on Friday I would not be surprised to see GBP/USD fall by over 1% and once the tapering begins a drop back towards $1.50 is not off of the cards.
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