The Pound rose sharply against the majority of the 16 most actively traded currencies including the Euro and the U.S Dollar, after a report from the Chartered Institute of Purchasing and Supply showed that growth in UK service industries accelerated to the fastest pace in more than a year last month. The report has increased optimism that the economic recovery is gaining momentum and raise the prospect of a near-term increase in UK interest rates.
The Bank of England are expected to keep interest rates on hold on Thursday, however the increase in service sector growth shows that the economy may have bounced back from the fourth quarter slump. If the preliminary GDP data for the three months to March is ahead of expectations, the prospect of a rate increase by May/June will increase significantly and the Pound should make gains. If the report comes in with a negative result, Sterling will weaken.
The Pound extended its gain against the U.S Dollar this morning, after a report from the Halifax showed that UK house prices rose 0.1% in March. The UK currency is poised to record its longest stretch of gains against the Dollar in two weeks, after property prices rebounded from the 0.9% decline in February. The report adds to recent optimism that the UK housing market is recovering, which adds to speculation that the economy is growing fast enough to warrant a rate increase next month.
The Pound has come under pressure against the majors today, amid the release of the GDP estimate for the first quarter from the National Institute of Economic and Social Research.