Sterling rose against the dollar on Monday as oil prices fell on reports of Iran diplomacy. ING says the move owes more to the dollar than to UK fundamentals, while UK manufacturing data came in stronger in October.
Sterling traded higher on Monday as the dollar eased on a 2-3% drop in oil prices after reports that U.S. President Donald Trump wants diplomacy with Iran to run its course. The oil move reversed Friday's positioning, when some traders bet on a fresh attack over the weekend.
Sterling rose 0.39% against the dollar to $1.3440, while the euro gained 0.65% to $1.1233, as of 04:17 ET (09:17 GMT).
ING sees a dollar-driven pound gain
ING says the pound's gain owes more to the dollar than to UK fundamentals. A 25 basis point Bank of England hike to 4% on Thursday is fully priced, and ING expects a 7-2 vote.
However, ING UK economist James Smith said the Bank is in "a strange situation: hiking not because the economic data is telling it to". Smith pointed to the risks presented by sharply higher energy prices.
Speculators remain short sterling. EUR/GBP has fallen nearly 4% in just over a month, but ING's Chris Turner said it is too early to expect a significant low.
UK manufacturing PMI hits a five-month high
Separately, UK PMI data arrived on Monday. The seasonally adjusted UK Manufacturing Purchasing Managers' Index climbed to 52.8 from 51.9 in September, a five-month high.
UK manufacturing production grew at its fastest pace in 25 months in October, according to S&P Global. The survey collected data between October 12-27, before the UK Autumn Budget statement on October 28.
Input costs increased for the 34th consecutive month, and staffing levels remained flat after six months of jobs growth.
Sources: Investing.com, Investing.com
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