Pound sterling (GBP) forecasted to hit 1.2 against the euro, 1.61 vs the US dollar

At 11:00 in London we see the pound to euro exchange rate is trading 0.7 pct higher on a day to day basis 1.19.

This marks a strong recovery for the GBP; and analysts are forecasting this strength will likely continue to at least the 1.2 level.

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Andy Scott, associate director at HiFX says:

“A week ago, sterling fell to a one-month low against the euro but has recovered by more than 2% to 1.19 and is back over 1.60 against the US dollar. We are looking for sterling to nudge the physiological 1.20 level against the euro. We still expect the dollar to recover against the pound following the weakness brought about by the recent government shutdown and so still view 1.60 as a favourable level to buy dollars.”  

Pound to dollar exchange rate propelled to 1.6, 1.61 in the forecast

It isn't only the euro that the British pound sterling (GBP) is having a great day against.

The pound to dollar exchange rate has moved higher to hit the 1.6 level.

"UK PMI Services printed at 62.5 well above the 59.8 forecast and higher than last month's reading on 60.3. The underlying data was bullish as well with new business component rising to 63.4 from 60.6 - the highest level since the series began in 1996. The employment index was at the best level in 16 years and output shot to 61.5 versus 60.5 - the strongest showing since 1998," says Boris Schlossberg at BK Asset Management.

Overall the composite PMI data suggests that UK economy is growing at a torrid 1.5% q/q pace which translates to an annual rate of 6%.

"If UK could maintain such momentum it would easily produce the best growth in the G-4 universe and would force the BoE to reconsider its relatively dovish stance," says Schlossberg.

Regarding the outlook for the pound to dollar exchange rate, Schlossberg says:

"The unit may try to make a run at the 1.6100 level as the day progresses, but for now it has found clear support above 1,6000 and is likely to hold that figure for the time being."

Sterling jumps after service sector data much stronger than expected

Sterling hit session highs against the euro and the US dollar Tuesday morning following the release of the October’s purchasing managers index for the all-important service sector. The index came in at 62.50, the highest print of activity since May 1997. The new business component came out at the highest since the series began in 1998.
Following positive surprises in the manufacturing and construction sector indexes, the early indicators for the fourth quarter look like 2013 could see the economy grow at its fastest pace since before the financial crisis. Markit, the company that measures and releases the data for all three sectors, said that combining the three indexes points to GDP growth this quarter of 1.3%. This should serve to ease some concerns that have arisen over the past few weeks that the recovery won’t be sustained. The buoyancy of the housing market where prices have been rising steadily helped by increasing mortgage approvals and the government’s help to buy scheme has been what a lot of commentators have put the recovery down to but clearly it’s broader based. With unemployment continuing to fall at a modest but steady pace, confidence will be maintained which should boost consumer spending and corporate investment.