Pound's rally against the US Dollar continues

The pound continued its rally against the US dollar yesterday, rising by 1.34 cents (0.81%) to finish the day at $1.6577.

• In early trading the pound fell from seven-month highs against the dollar, as the news that an Abu Dhabi government-owned firm had sold roughly £3.5 billion worth of Barclays shares shook confidence in the UK banking sector. The FTSE 100 dropped 1% in early trade as a result, prompting traders to lock in profits after a sharp rally for the pound over the last month.
  
• However, the dollar’s modest recovery petered out just after lunch as US stock futures turned higher, helping to renew demand for higher risk currencies like the pound. Investors also drew heart from Monday’s better-than-expected manufacturing activity surveys coming out of China, the eurozone, the UK and the US.
  
• Sterling ’s gains were also extended following the release of much better-than-expected Pending Home Sales data in the US. This month’s reading of 6.7% was well-ahead of the 0.4% analysts had expected and also a healthy gain on the 3.2% registered last month. As a core driver of the global economy, news that the US housing market may be tentatively recovering was received positively by investors, prompting them to again look beyond the safe-haven of the greenback.
  
• In trading so far today the pound has resumed its rise against the greenback as investors continue to buy into the story the UK economy is on the cusp of recovery.
  
• In the UK, Services PMI data is out at 09.30 BST, whilst in the US, ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI figures are due at 13.15 BST & 15.00 BST respectively.