Stong servies data and rallying equities were unable to buoy a weak pound yesterday, enabling the dollar to creep up

The pound continued to edge downward, undermined by speculation ahead of the MPC meeting later this week.

• Data revealed that Britain’s services sector grew more strongly than expected in September, expanding at its fastest rate for two years, quelling fears over the UK recovery following weak PMI data in the manufacturing and construction industries last week.
  
• However, the data failed to buoy confidence in the pound significantly with investors remaining wary of taking positions in UK assets ahead of the MPC statement this week.
  
• Additionally, business activity in the US non-manufacturing sector expanded in September, against market expectations of standstill, which supported dollar buying.
  
• The equity markets also rallied from lows at the end of last week, as confidence returned to the markets, however this was of little benefit to a burdened pound, with the pair closing relatively unchanged at 1.5934.
  
• The US currency has come under pressure this morning however, following speculation that the dollar may be dropped as the currency used in oil trades in the Gulf States, allowing the pound to make hesitant gains.