Pound hits highest level against the euro in nearly two years as February interest rate hike looms
The pound hit its highest level against the euro in almost two years as data indicated Britain’s economy was holding up well.
IHS Markit’s Purchasing Managers’ Index showed manufacturing activity grew again in December, despite Covid. Factory production climbed as supply chain delays eased, and workers charged through the pandemic backlog.
Sterling rose to €1.199 – its highest since February 2020.
Sterling has risen to €1.198 – its highest since February 2020. The pound was being helped by investors who were betting that the Bank of England will raise interest rates again next month
December’s PMI reading of 57.9 was little-changed from the three-month high of 58.1 in November.
Any reading above 50 indicates growth. In the eurozone, the manufacturing index fell to a ten-month low of 58.
The pound was helped by investors betting that the Bank of England will raise interest rates again next month, after last month’s first rise in three years.
Money markets are pricing in a rise from 0.25 per cent to 0.5 per cent in February.
Factory production grew at its fastest pace in four months.
But the rate of growth in overall activity was dragged down by a continuing decline in new exports.
Rob Dobson, a director at IHS, said: ‘The upturn remains subdued compared to the middle of the year.’
He also warned that ‘with restrictions and Omicron cases both rising, the growth and inflation backdrops could change again in the early part of 2022’.
There was another ‘substantial’ rise in manufacturers’ costs in December, with reports of higher prices for chemicals, electronics, energy, food, metals, timber and wood. Freight, shipping and air transport costs have also soared.