Sterling rose versus the dollar and euro on Monday after unexpectedly strong manufacturing data led investors to trim expectations of an interest rate cut later this week. Analysts are split over whether weak housing data will prompt the Bank of England to deliver a pre-Christmas interest rate cut on Thursday - out of 56 polled by Reuters last week, 15 predicted a cut.
The survey gave a 35 percent median probability of a cut but the stronger than expected manufacturing November PMI data - which came in at 54.4, above the 52.5 forecast by analysts - prompted investors to scale back bets that the BoE may cut rates when it meets on Thursday.
"The market is now erring on the side of thinking nothing will be done (on interest rates) on this occasion," said Derek Halpenny, senior currency economist at BTM UFJ. "When the market is so divided data can move things ... If services data comes in weaker than expected (on Wednesday), it would leave the door open for a cut."
At 1458 GMT, the pound was up 0.4 percent at $2.0651 and the euro was down 0.2 percent at 70.98 pence. Separately, other data also showed the UK manufacturing sector in good shape.
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