Sterling soars to seven-month high against US Dollar

Sterling soared 2.56 cents (1.58%) against the US dollar yesterday to close the day at $1.6443.

• In early trading yesterday, sterling rose by over two cents against the greenback to hit a seven-month high as investor demand for riskier assets increased.
  
• Improved Chinese manufacturing data released overnight drove European equities higher mid-morning, prompting investors to look beyond the safe-haven of the dollar.
  
• Furthermore, better-than-expected UK housing and manufacturing data also drove sterling’s gains. Hometrack’s survey showed house prices in England and Wales were unchanged in May, the first time in 20 months there has been no month-on-month fall, whilst the headline Manufacturing PMI index came in at 45.4 in May, comfortably ahead of the 44.0 predicted.
  
• Sterling’s gains were further extended yesterday afternoon after the release of US ISM manufacturing data, which showed a slowing in the sector’s rate of contraction. It came in at 42.8, up from 40.1 last month.
  
• Strong rises on UK equity markets also fuelled sterling’s gains late yesterday. The FTSE 100 eventually finished the day up 88.25 points to close at 4506.19.
  
• In trading so far today, the pound has retreated from yesterday’s highs as investors turn their attention to Thursday’s Bank of England interest rate decision.
  
• There are no major announcements due in the UK today, whilst in the US, Pending Home Sales (MoM) are out at 15.00 BST.