Sterling Steadies As Survey Shows Nascent Manufacturing Recovery

Sterling hovered around $1.24 on Wednesday after manufacturing survey data pointed to a small increase in output after the historic collapse caused by the coronavirus.

The Purchasing Managers Index survey for June came in at 50.1, in line with the forecast from economists polled by Reuters and up from 40.7 in May. It was unrevised from a preliminary reading. The move above the 50 line signifies growth for the first time since February.

By 0835 GMT, the pound was unchanged at $1.2405, while against the euro it was flat on the day at 90.61 pence.

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The quiet trading came after a big rise in sterling on Tuesday.

British Prime Minister Boris Johnson announced a new spending plan on Tuesday to revive the economy, but analysts said the move higher was not down to his announcement as the planned spending was limited and largely expected.

Concerns that Britain will fail to secure a trade agreement with the European Union at end-2020 continue to weigh on the currency, although with the pound down 6.5% versus the dollar so far this year, some analysts say it is due a rebound.

“We believe UK markets are in pole position to play catch-up,” said Mark Haefele, Chief Investment Officer, UBS Global Wealth Management, citing “overdone” political and monetary risks in the UK and a belief that UK assets are undervalued.

“In particular, we see sterling as the most notable beneficiary of the vulnerability of the US dollar, which we expect to fall as safe-haven flows reverse and as political uncertainty mounts ahead of the November US presidential election,” he said.

– Reuters