Pound sterling rises against dollar as Britain's service sector beats forecast

The pound rose for the first time in three days against the dollar

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The Independent Online

The pound rose against the dollar on Wednesday, after figures showed that Britain’s service sector grew faster than expected in March.

IHS Markit’s monthly Purchasing Managers’ Index showed that business activity and new work in the services sector, which accounts for three-quarters of the UK economy, grew last month at the strongest rate so far this year.

Sterling jumped by half a cent against the US dollar to $1.248 on the data. 

“Sterling bounced high after today’s PMI report showed the UK’s key services sector has returned to health after a fairly lacklustre start to the year,” Neil Wilson, senior market analyst at ETX capital, said.

But while the data is solid - beating all forecasts in a Reuters poll - the overall picture suggest Britain’s economy cooled from the end of last year.

The services PMIs reading follows Markit surveys this week that both showed manufacture and construction slowed in March.

Sterling has dropped by almost 17 per cent against the dollar since Britain voted to leave the EU in June last year and  analysts still believe the Brexit negotiations will continue to drive the pound over the next months.

 

“Can the pound stick it at this level? There’s likely to be some selling into this rally that may pare gains and cable may struggle to scale the $1.25 handle on this data. It’s hard to see the PMI data today doing anything to really alter the outlook for the Bank of England as the quarter-on-quarter numbers are still weaker than the end of last year,” Mr Wilson said.

“The data supports the view that the Bank will need to tolerate higher inflation in order to support growth and stimulate demand, which though resilient looks vulnerable to shocks.”

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