The latest round of UK economic data today has helped lift the British Pound further. Following news earlier in the week that UK inflation had more than doubled over the last month, the latest set of PMI readings for April also showed strength.
Manufacturing Soars in April
The manufacturing PMI was seen rising to 66.1 last month, up from the prior month’s 60.9 reading and well above the 60.7 reading expected. This marks the highest reading on record for the factory sector, beating last month’s reading which itself had surpassed the former record high of 61 set in July 1994.
Demand Picking Up
The ONS noted a sharp increase in demand from the US and China as well as the as the passing of issues related to Brexit. Looking at the sub-categories of the reading, there were strong gains made in output, new orders and employment. Notably, the stocks of purchases category was seen returning to growth for the first time since the pandemic struck, helping drive the overall reading to record highs.
Services Sector Improves Again
The services sector saw continued expansion last month also. While the 61.8 reading was slightly below the 62 reading the market was looking for, it was still an improvement on the prior month’s 61. The services sector has been rebounding firmly over recent months as the UK continues along the path to reopening. With the return of indoor hospitality and dining venues this month, the sector is likely to see even firmer growth this month.
Pressure on BOE
With the economic recovery continuing to gather pace, the question of at which point the BOE will begin to scale out of easing, is attracting increasing attention. The BOE has so far stuck to the view that any spike in inflation this year as a result of reopening will be temporary and therefore is not forecasting any shift in policy. However, if the recovery happens at a quicker pace than the bank is forecasting which, judging by recent data, looks increasingly likely, the bank might be forced to shift its view ahead of schedule.
The breakout above the 1.8203 level has seen price trading up to test the 1.8316 level. With the MACD and RSI both bullish here, the market looks likely to continue higher. Overhead, the bull channel top and the 1.8461 levels are the next resistance areas to note.
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