Sterling lifted by manufacturing report

The pound is up 0.5% versus the US dollar after a large jump in UK manufacturing.

The pound is trading at $1.5577 following a higher-than-expected manufacturing purchasing managers index (PMI). After July's reading of 54.8 economists were expecting a level of 55.2, but the reading of 57.2 for August is the highest since February 2011. This is further proof that the UK economy is on the mend.

On Thursday the Bank of England announces the UK interest-rate decision as well as news about quantitative easing (QE). We are not expecting any change in policy, but if the minutes from the meeting are optimistic we could see the pound trade higher versus the dollar. Governor Mark Carney has now pegged QE policy to the level of unemployment, and the positive manufacturing report could be an indication that the jobless rate will also improve.

It is a public holiday in the US today so we are not expecting any economic udpates from across the pond. It is also likely that trading volumes will be light for the day as most US dealers have the day off. 

Spot FX GBP/USD chart

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