Investing.com – The pound rose to the day’s highs on Wednesday after data showing that the UK manufacturing sector grew at a faster than expected pace in October, boosting the outlook for fourth quarter growth.
GBP/USD hit a high of 1.3319, the most since October 13 was at 1.3302 by 05:55 AM ET (09:55 AM GMT), from around 1.3285 ahead of the report.
Research group IHS Markit said that its UK manufacturing purchasing managers’ index rose to 56.3 in October from an upwardly revised 56.0 in September. Economists had forecast a reading of 55.8.
The increase was driven by a surge in new orders, indicating that the weaker pound is helping manufacturers. But the fall in the pound also meant that price pressures remained elevated, the report said.
The report came as investors awaited the outcome of the Bank of England’s meeting on Thursday amid expectations for the first interest rate hike in almost a decade.
Sterling gains were held in check by the prospect of a dovish rate hike, one which will not be followed by further rate rises.
The euro fell to four-and-a-half month lows against the pound, with EUR/GBP down 0.22% to 0.8747 from around 0.8758 earlier.
Investors were looking ahead to the outcome of the Federal Reserve’s meeting later in the day for fresh signals on future monetary tightening.
The Fed was expected to leave interest rates unchanged at the conclusion of its two-day policy meeting, but investors were waiting for any indications that it will resume raising rates next month as expected and on the timing of any rate hikes in 2018.
Traders were also awaiting President Donald Trump’s announcement about his pick for the next head of the U.S. central bank. Recent reports have indicated that Trump is likely to appoint Fed Governor Jerome Powell, who is viewed as more dovish than other candidates.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at a touch higher at 94.54.