Sterling has traded to the highest level since 2008 on Tuesday against the US dollar, following better than expected macro data. UK Manufacturing PMI for June at 57.5, up from 57.0 in May, a number above 50.0 states expansion. The other highlight of the report was job creation at a 39-month high adding to the positive sentiment for the UK economy.
RT @World_First: UK Manufacturing PMI (June) = 57.5 vs 56.8 expected and 57.0 previous > Q2 growth surely over 1%— Mike Bird (@Birdyword) July 1, 2014
Cable traded up to a session high of 1.71466, on the positive data point, with traders betting the improving economy will be a tipping point for the Bank of England’s MPC to vote to increase interest rates. The most recent minutes from the MPC, showed that the committee was still unanimous in voting 9 - 0 for leaving interest rates unchanged. Technical traders had eyed the 1.7040 level as resistance/support for the pair, being the previous high. Sterling at these levels is relatively overbought on the RSI indicator (78.27) on a daily chart, which could indicate the short term upside is capped. However if the pair can hold the 1.7040 level over the medium term, with the better than expected data points, and the interest rate hike expected around Q1 2015, over the longer-term there is good potential for further strengthening.
UK Markit/CIPS UK Manufacturing PMI (Full Release - June)