3
Aug
Sterling at six-month dollar high
Sterling has risen further to hit a new six-month high against
the dollar, with analysts pointing to both rising confidence in UK
economic prospects and worries about the US recovery.
The pound strengthened to $1.5965, the highest level it has
reached since early February.
The UK has seen upbeat manufacturing sector data and robust bank
earnings.
But there has been speculation that the US may resort to pumping
money into the economy to maintain growth.
This adoption of so-called quantitative easing - already done in
the UK - would make the dollar a less attractive currency in which
to invest.
Such reports had led to the dollar taking "a pummelling" said
Jane Foley, research director at Forex.com.
The dollar fell against several other currencies, including the
euro. Meanwhile, sterling was down slightly against the euro at
1.2042 euros.
Earlier this week, figures showed that US economic growth had
slowed between April and June. US GDP grew by an annualised rate of
2.4%, compared with an annual rate of 3.7% in the previous
quarter.
'Challenging environment'
Strong earnings from HSBC on Monday added to confidence in the UK
recovery, analysts said.
And the pound was also helped by a report from the EEF
engineering group which said the UK's manufacturing sector had
performed better than expected in the first half of the year.
Stronger-than-expected UK growth could create "a supportive
dynamic for the pound," said Lee Hardman, currency economist at
Bank of Tokyo-Mitsubishi UFJ.
However, a survey released on Tuesday indicated that activity in
the UK construction sector had fallen in July.
The Chartered Institute of Purchasing and Supply said its
construction index had dropped to a four-month low of 54.1 in July
from 58.4 the previous month.
The survey highlighted that the sector continued to face "a very
challenging environment", said Howard Archer, chief UK and European
economist at IHS Global Insight.
"This will likely cause the recovery to be gradual overall and
bumpy."
Source: http://www.bbc.co.uk/news/business
03/08/2010