Pound Maintains Gains on Services Data and ECB Speculation

By TraderVox.com

Tradervox.com (Dublin) – Merkit Economics and the Chartered Institute of Purchasing and Supply continued to boost the pound with more than expected data reports. On Tuesday, a report showed that Manufacturing sector shrunk less than the market was expecting and these positive results were compounded by another report yesterday showing that the services sector expanded more than expectation. These reports have dampened speculation of Bank of England expanding its monetary policy which is projected to increase to 425billion pounds by the end of the year. The pound has maintained yesterday’s gains as speculation about bond buying plan from the ECB increased. European Central Bank is set to meet tomorrow after its President Mario Draghi made a spirited appeal on the need of the program.

Paul Robson, a London-based Senior Foreign Exchange Strategist at the Royal Bank of Scotland, indicated that the UK data released this week is marginally positive for the pound and other European currencies. He pointed that this is as a result of the increased optimism the European Central Bank will move to stabilize nations experiencing high borrowing costs. He made these comments after a report showed that services sector in the UK expanded to 53.7 from 51 in July. This is the highest level it has been in the last five months. The market was expecting an increase to 51.2.

The pound increased against the euro and dollar as it emerged that Draghi’s bond purchasing program involves draining funds from other financial systems. The information was released as concerns about the source of money rose, with skeptics indicating that the ECB was planning on printing more money. Draghi admitted in a closed door session at European Parliament on September 3 that the central bank has lost control of the borrowing costs in the region.

The pound increased against the dollar by 0.3 percent to exchange at $1.5910 at the close of trading in London yesterday. The UK currency had reached a May 16 high of $1.5934 during the day.

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