- Posted by Shyam Gokani in Bank of England, Brexit, Currency, Dollar, Economy, EUR, GBP, Mark Carney, Sterling, UK
- November 2, 2016
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Sterling hit a two-week high against a dollar weakened by worries about the U.S. presidential election next Wednesday, as investors waited for construction sector data for the latest clues on the health of the British economy.
The battered pound has recovered almost 1 percent this week, boosted by the news that Bank of England Governor Mark Carney would extend his tenure until 2019.
Carney’s decision eased concerns about perceived attacks on the Bank’s independence in an uncertain political environment, in which worries over a “hard” UK exit from Europe’s single market have sent sterling tumbling.
The currency built on its gains this morning, climbing as much as a third of a percent to $1.2285, its highest since Oct. 20, against a dollar that was lower across the board on concerns that Donald Trump could win the U.S. presidential election.
Investors are looking to Thursday’s BoE policy decision and quarterly inflation report. Sterling’s fall – almost 20 percent since the vote for Brexit – is expected to push the BoE to raise its inflation forecasts to show a bigger overshoot of its price target than at any time since it gained independence in 1997.
Focus was also on the latest purchasing managers’ index (PMI) survey for the construction sector, which was released at 9:30am GMT, the reading came in stronger at 52.6 than the expected 51.8. No impact on the rates though.
The currency didn’t react much to the PMI survey for the manufacturing sector yesterday, which showed the highest level of activity in more than two years.
On a whole the UK economic data is strong however the Brexit talk is keeping the pound low.