Positive economic data in the US failed to buoy demand for the broadly weaker sterling

Positive UK manufacturing data was unable to offset bearish sentiment toward the pound yesterday with the US dollar closing 0.3% up.

• Sterling opened under heavy pressure yesterday as the markets speculated that the BoE would decide to inject further monetary stimulus into the economy at their next meeting.
  
• The pound was able to trim early losses though after a stronger-than-expected reading of UK manufacturing activity showed the sector expanded after prolonged weakness.
  
• The PMI index rose to 53.7 in October from an upwardly revised 49.9 in September, signalling the fastest pace of growth since November 2007 and beating forecasts for a rise to 50.1.
  
• In the afternoon, the pound recovered further ground as a raft of US economic data on manufacturing, construction, and housing showed more evidence of a recovery in the world's largest economy, encouraging investors to buy riskier assets.
  
• However, despite positive data, the pound was unable to make gains, still closing nearly half a cent down on the day as investors clearly remain cautious ahead of important central bank meetings this week.