Published: 2 Jan at 5 PM Tags: Pound Sterling, Euro Exchange Rate, Currency Exchange, Forex, Swiss Franc Exchange Rate, Euro Crisis, UK, Economy, France,
With markets returning to normal after the Christmas and New Year breaks the Pound was able to consolidate gains against the Euro during European trading.
The British currency was supported by a report showing that the UK manufacturing sector expanded for a ninth month in December.
Although the pace of expansion slowed slightly, the measure remained above the 50 mark separating growth from contraction and indicates that the UK's economic recovery remained buoyant as the year came to a close.
The Pound rallied against peers like the Euro in the aftermath of the data release, prompting this response from currency strategist Jeremy Stretch; 'Sterling is acting as a little bit of a headwind to the recovery story, although there is still a case to be made the Euro-Sterling will continue to go lower. The UK economy is going to have growth, but it will be relatively unbalanced growth.'
Sterling's gains against the Euro were aided by the news that the French manufacturing sector contracted by more than anticipated in December.
Fears that economic weakness in France could derail the Eurozone's tentative recovery wore on the Euro during local trading.
French manufacturing PMI came in at 47.0 rather than the 47.1 level expected.
In a statement accompanying the figures Markit economist Jack Kennedy observed; 'The French manufacturing sector ended the year in disappointing fashion. Sharper falls in both output and new orders drove the PMI down to its lowest level in seven months, as a weak demand climate continued to weigh heavily. Anecdotal evidence
suggested that lingering uncertainties continue to hold back the spending and investment that are necessary to support a recovery in the sector. Instead, most key variables in the latest PMI survey showed deteriorating trends to suggest that no such turnaround is in sight.'
Tomorrow the main cause of Pound movement is likely to be UK construction PMI.
Economists expect the measure to slip from 62.6 to 62 in December but a surprising result could trigger Sterling volatility.
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