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Pound surges to 5-week high against dollar despite mixed UK economic data

Gaurav Sharma
British pound sterling street

The pound surged to a five-week intraday high versus the dollar on Friday (8 September) and held firm against the euro, as UK manufacturing data pointed to an upbeat picture.

Earlier in the session, the Office for National Statistics said manufacturing output rose 0.5% in July, boosted by improving car production, but growth in the broader measure of industrial output slowed to 0.2% from 0.5%.

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However, the mixed picture did not stop the sterling from firming up against major crosses.

At 4:31pm BST, the pound was up 0.72% against the dollar, changing hands at $1.3195 having reached as high as $1.32 just past midday.

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The pound also got respite against the euro holding firm near the €1.10-mark up 0.66%.

Kit Juckes, head of forex at Societe Generale and IBTimes UK columnist, said the session has seen dollar weakness extend, allowing the pound to rebound as the UK released better than expected trade and industrial production data, just as the euro spiked to near three-year highs against the dollar, changing hands at $1.2029, up 0.05%.

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"Dark clouds over the eurozone continue to lift," Juckes added.

The European Central Bank (ECB) left policies unchanged at its meeting on Thursday. However, President Mario Draghi suggested October might be the month to decide the future of the central bank's €2.3trn (£2.09trn) bond-buying programme.

Lukman Otunuga, research analyst at FXTM, said Draghi's cautious tone was unable to tame the rampant euro bulls, sending the EUR/USD to levels not seen since January 2015.

The euro's aggressive appreciation continues to suggest that bullish investors have built immunity into Draghi's dovish mantra, with most focusing on Europe's encouraging macro fundamentals and quantitative easing (QE) tapering expectations.

"While Draghi stated that the recent volatility in the euro required close attention and is a source of uncertainty, investors seemed to be more interested in the stronger than expected eurozone growth seen so far this year. What really gave the euro bulls a shot in the arm, was when Draghi stated that the bulk of the QE decision will be made in October."

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