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Sterling Gets Help from Strong Rebound in Services, Rally of Stocks

August 5, 2020 at 18:31 by Vladimir Vyun

A column of 50 British pound notesThe Great Britain pound demonstrated a decent performance during Wednesday’s trading session, even though it was not among the strongest currencies on the Forex market. The sterling got support from the strong rebound of the UK service industry as well as a rally of British stocks.

The FTSE 100 Index, which tracks the major London-listed stocks, climbed more than 1% today. Other European stock indices also demonstrated a strong performance, and so far US stocks do not look bad either. That put investors into an optimistic mood.

According to the final estimate, the seasonally adjusted IHS Markit/CIPS UK Services PMI Business Activity Index climbed from 47.1 in June to 56.5 in July — the highest level since July 2015. The actual reading was in line with analysts’ forecasts and the preliminary figure of 56.6. Tim Moore, Economics Director at IHS Markit, talked about the strong recovery:

UK service providers are starting to see light at the end of the tunnel after a record slump in business activity during the second quarter of 2020. July data revealed the fastest increase in business activity for five years, which adds to signs of recovery across the manufacturing sector this summer.

Higher levels of service sector output were almost exclusively linked to the reopening of the UK economy after lockdown measures and the subsequent return to work of employees and clients. However, these are still the very early stages of recovery and survey respondents often commented on achieving growth from an exceptionally low base.

The Bank of England will make its monetary policy decision tomorrow. No major changes to the existing policy are expected, meaning that the benchmark interest rate should remain at 0.1% and the size of the asset-purchase program at £745 billion.

GBP/USD rose from 1.3070 to 1.3113 as of 18:30 GMT today, reaching the high of 1.3161 intraday. EUR/GBP was up from 0.9028 to 0.9044. GBP/JPY gained from 138.15 to 138.52, and its daily high was at 139.00.

If you have any questions, comments, or opinions regarding the Great Britain Pound, feel free to post them using the commentary form below.

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