Fundamental Comment

Pound sets new eight-month peak on weaker dollar

Pound sets new eight-month peak on weaker dollar

The pound traded near its highest level since December 2019 versus the U.S. dollar, resuming its advance for a third straight session, taking advantage of the dollar’s weakness as Fed Powell pledge to keep loose monetary policy.

The GBPUSD traded higher at 1.3455, where the highest level was hit at 1.3482, after it recorded a sharp weekly gain last week.

At Jackson Hole Symposium last week, Fed Chair Jerome Powell vowed to keep the loose monetary policy even if inflation surpassed the central bank's objective, pushing the green currency lower against major currencies.

The dollar index plunged this week to the lowest level since May 2018 at 91.72, noting that it locked its fourth monthly decline by the end of August.

The improvement in sentiment mainly helps stocks and pound at the expense of refuges, led by the U.S. dollar.

Data released today from the U.K. showed that manufacturing PMI edged up to 55.2 in August, compared to 53.3 in July, reflecting improvement after the ease of lockdown measures.

“Manufacturing production rose at the fastest pace since May 2014, reflecting solid expansions across the consumer, intermediate and investment goods sub-sectors,” Markit said.

Versus the euro, the pound pushed the EURGBP pair down to a low of 0.8892, which is the lowest since June 10.

Eurozone final manufacturing PMI came in at 51.7, down slightly on July’s reading of 51.8, where both France and Spain clawed back to contraction region.

Later in the day, U.S. ISM manufacturing PMI for August may signal a widening expansion to 54.6 from 54.2 in July.

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