British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency up vs EUR a business headline data hits 10 month high; risk-off trade also helps

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Category: British Pound Sterling

Published on Monday, 06 February 2012 10:01

Written by Will Peters

This morning uncertainty surrounding the next leg in moving the Greek debt crisis forward has hit investor confidence. As such the euro is being sold off.

British Pound Sterling (GBP) in US Dollar (USD): GBP/USD is 0.46% lower at 1.5740.

British Pound Sterling (GBP) in Euro (EUR): GBP/EUR is 0.43% higher at 1.2066.

British Pound Sterling (GBP) in Australian Dollar (AUD): GBP/AUD is 0.15% higher at 1.4714.
 
Helping the British pound are memories of last week's data:

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January services PMI was above consensus at +56.0, rising from the December print of 54.0.

"Our UK economist notes that the headline business activity balance is at a 10-month high and above the long-run series average of 55.0. Details show the highest forward-looking business activity balance since May, the biggest rise on record, the strongest employment growth since March 2008, and fastest new business growth since July. This supports our view that BoE will raise asset purchase target by at most GBP50 bn in the next meeting," says a morning exchange rate note from UBS.

Deutsche Bank, in their Fixed Income Weekly say:

"The PMI surveys have improved materially over the past three months.  From falling to their lowest since the tail end of the 2008-09 recession in October last year they now suggest growth back above its long-run average. Indeed, they are consistent with the recovery continuing at a rate of around 0.7% qoq (2.8% annualised), if maintained at current levels."

This will have an important bearing on the Bank of England’s deliberations this month.

"As a result, we have changed our view from GBP75bn to GBP50bn of additional asset purchases to be conducted between February and May. If sentiment and activity hold up this could even be the last round of purchases, although the fragility of the recovery and event risk in Europe remain important risks in favour of a continuation of the programme after May," say Deutsche Bank.