Sterling rose against the euro yesterday, after data showed Britain’s dominant services sector grew strongly in March, though gains were capped by uncertainty ahead of next month’s general election. The Markit/CIPS services purchasing managers’ index (PMI) surged to an eight-month high of 58.9 in March, up from 56.7 in February, pointing to a speeding up of overall economic growth in the first three months of 2015. This had a positive impact on the FTSE 100, as the index hit its biggest one-day gain since January. The FTSE 100 index closed up 1.9 percent, at 6,961.77 points. Against the dollar, sterling was up a touch at $1.4898, having risen to $1.4900 after the data was released. The two-month implied volatility for sterling/dollar was trading at 12.5 percent, implying uncertainty from the May election to spill over to June.
The euro fell Tuesday to its lowest level in six days, as European traders returned to their desks after a four-day weekend. The single currency briefly trimmed losses after the U.S. Labour Department on Thursday said job openings rose to 5.13 million in February from 4.97 million in January. The dollar was little-changed against its other rivals after the report. The euro surged against the dollar Friday after the Labour Department reported the weakest rate of jobs growth in 15 months, and it continued to trade above $1.09 during Monday’s session. But swings in the euro-dollar exchange rate were likely exaggerated over the last two sessions amid thin trading volume, analysts said.
The dollar has paused for breath but retained a bulk of its overnight gains after currency bulls scooped up the greenback following the tumble induced by weak U.S. non-farm payrolls late last week. The dollar index slipped 0.2 percent to 97.608 after gaining 0.9 percent overnight. The dollar has been strengthening due to underlying demand rather than on a set of factors as Investor flows continue to favour the dollar even though the Federal Reserve now looks likely to delay hiking rates. Against the yen, the greenback rose as high as 120.45 overnight, but was down 0.3 percent at 119.855 after the Bank of Japan’s decision to stand firm on monetary policy Wednesday despite slowing inflation.