Sterling was one of the best performing major currencies today as it rallied above the key 1.53 level on stronger UK industrial production data.
The pound accelerated its gains against the dollar to reach a two-week high of 1.5321 following the release of the August numbers which came in at 1.0% month-on-month to beat expectations of a 0.3% rise. Meanwhile, manufacturing production (which is a large component of industrial production), rose by 0.5% month-on-month, above a 0.4% increase that was forecast. In July it was down 0.7%.
The main risk event for the pound lies with Thursday’s Bank of England meeting. No change is expected in policy but the minutes that will be released soon after the meeting will be closely watched for the MPC members voting pattern with regards to a rate hike.
The euro fell against the pound to 0.7335 on the back of the strong UK data, reaching a new two-week low.
Against the dollar, the euro traded between 1.1221 and 1.1272. Early European session weakness was driven by unexpectedly weak German industrial output data. Production in the Eurozone’s largest economy fell by 1.2% in August. A small gain of 0.3% was expected. Spanish industrial output was also weaker-than-expected. The disappointing data could add to existing concerns about growth in the euro area and raise expectations for more policy easing by the ECB. More stimulus would be negative for the euro.
The dollar/yen pair traded around the key 120.00 yen level throughout the session. The yen gained for a second day versus the greenback after the Bank of Japan held its asset purchase program unchanged following the conclusion of a monetary policy meeting today. Thursday’s Japanese core machinery orders now come into focus as there are no US economic data releases today.
The commodity-linked currencies performed well today, helped by rising commodity prices, especially oil which gained over 7% since Wednesday to reach $49.50. The Canadian dollar benefited the most from higher crude prices. As a result the greenback fell versus the loonie to its lowest since August 13 to reach 1.2970. Weak Canadian building permits data released today were shrugged off. Permits fell short of expectations in August and shrank 3.7% to 7.55 billion Canadian dollars. Economists had forecast a 0.3% increase.
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