Monday, 1 Nov 2010

Strong Economic Data Boosts Pound

The dollar is stronger in European trading following positive economic data from both China and Great Britain.

At lunch time during the European trading session the dollar was up versus the majors. The EUR/USD is lower at 1.3960, down from an opening day price of 1.3980. The GBP/USD is trading at its opening day price of 1.6064. The USD/JPY is down at 80.40. This comes following a spike in the price with the pair climbing as high as 81.43 during the opening hours of Japanese trading. European equities were up as the DAX was trading higher by 0.25%.

Early this morning Chinese PMI numbers handedly beat market expectations, coming in at 54.7. Economists had forecasted a reading of 53.8. The strong numbers surprised the market as economic growth typically staggers in China during the month of October.

UK manufacturing data also was stronger than expected, posting an increase to 54.9 on expectations of only 53.2. This was the first rise in the data piece since March. An increase in exports contributed heavily to the surprisingly positive data.

Traders took the positive data as an opportunity to buy dollars. The pound also found good bids as the GBP/USD approaches a two week high.

The market will be expecting further data releases later this afternoon. US ISM Manufacturing data will be released today at 14:00 GMT. Expectations are for a decrease in the index to 54.2 from 54.4.

If the US data is stronger than expected, the EUR/USD could push above 1.4015, the downward sloping resistance line that has been holding the pair in check since mid-October.