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Sterling hits 10-month highs as UK factory growth rebounds

8/1/2017, 6:30:46 PMMarket Analysis
Sterling hits 10-month highs as UK factory growth rebounds

The pound rose to 10-month highs against the broadly weaker U.S. dollar on Tuesday after data showing that UK factory growth rebounded in July on the back of a surge in new exports.

GBP/USD hit 1.3239 the most since September 2016 and was at 1.3228 by 05.11 a.m. ET (09.11 a.m. GMT).

Financial data company Markit said its manufacturing purchasing managers' index rose to 55.1 from a downwardly revised 54.2 in June, better than economists’ forecasts for a reading of 54.4.

The increase was driven by foreign demand for UK goods, which rose by the fastest rate since the all-time record in April 2010 the report said.

The rate of job creation was among the best recorded in the past three years, Markit said.

Rob Dobson, Director at IHS Markit, says UK manufacturing started the third quarter of 2017 on “a solid footing”.

The dollar was wallowing near 14-month lows against a currency basket after falling for a fifth consecutive month in July in what is its longest losing streak since 2011.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 92.8, after falling as low as 92.64 on Monday, the weakest since May 2016.

The index fell 2.88% in July, its fifth straight monthly decline and its largest monthly percentage decline since March 2016.

Deepening political turmoil in Washington and diminished expectations for a third rate hike by the Federal Reserve this year have pressured the dollar lower.

Sterling was also higher against the euro, with EUR/GBP down 0.36% to 0.8929.

The euro zone economy grew at a faster pace in the second quarter than the first, according to preliminary data released on Tuesday.

The European Union's statistics office Eurostat said gross domestic product euro area rose 0.6% quarter-on-quarter in the three months to July and by 2.1% year-on-year, up from 1.9% in the first quarter.

Economists had forecast growth of 0.6% in the quarter and 2.4% year-on-year.