Sterling is soaring higher on Monday, after another set of UK economic data gave a positive surprise to investors.
IHS Markit’s latest PMI for the UK’s services sector — which accounts for more than 75% of GDP — came in at a reading of 52.9 against a July reading of just 47.4, its lowest since the financial crisis. Services PMI had been expected to read 50.
As a result of the positive shock, sterling took off. Prior to the release it was broadly flat against the dollar on the day, but immediately afterwards jumped around 0.6% against the greenback to trade above $1.3365. It has since stabilised, and is up by just more than 0.5% on the day. Sterling is now at levels not seen since the beginning of August.
Here’s how sterling looks just after 9:50 a.m. BST (4:50 a.m. ET) around 20 minutes after the release:
Despite Monday’s rise, more weakness from sterling is expected, with HSBC arguing last month that sterling will fall to $1.10, and reach parity with the euro by the end of 2017. Other predictions about the pound’s medium term outlook range from $1.20 at Goldman Sachs and $1.15 from Deutsche Bank, all the way to $1, a prediction made by former PIMCO executive Mohammed El-Erian.
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