- Posted by Shyam Gokani in Bank of England, Brexit, Currency, Dollar, EUR, GBP, Inflation, Retail Sales, Sterling, UK
- December 1, 2016
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Sterling held firm this morning, having recorded its best month of gains against the dollar since March and its best month against the euro since 2009.
This morning the Purchasing Managers Index dipped to a four-month low of 53.4 from 54.2 in October, remaining above the 50-mark dividing expansion from contraction. Economists had forecast a reading of 54.4. Measures of new orders declined on the month. However, the PMI data has had no impact on Sterling.
Another factor supporting the pound has been signs that investors are reducing short positions on the currency that surged after Britain’s vote to leave the European Union in June.
Britain’s economy has performed much better than expected since June’s vote to quit the EU. But a bigger test will come next year when inflation is expected to rise sharply, eating into households’ spending power.
A manufacturing survey from the Confederation of British Industry published last week showed the biggest increase in price pressures for nearly three years, although new orders rose at the fastest rate since before the Brexit vote.
The PMI surveys often differ with official data on Britain’s manufacturing sector. In the July-September period, manufacturing shrank by almost 1 percent in quarterly terms, the Office for National Statistics said last week.
The pound has continued to gain against the Euro this morning due to uncertainty surrounding the Italian Referendum this coming Sunday.