Pound Rises Versus Dollar as U.K. Services Data Beat Forecasts

The pound rose for the first time in six days against the dollar as a gauge of U.K. services growth accelerated in June more than economists predicted.

Sterling strengthened versus most of its 16 major peers, trimming a weekly decline against the U.S. currency. An index of services, based on a survey of purchasing managers, climbed to 58.5 last month from 56.5 in May, Markit Economics said on Friday. The median forecast in a Bloomberg survey of analysts was 57.5.

The timing of when the Bank of England will tighten monetary policy was still difficult to predict as U.K. data have been mixed. A measure of manufacturing output, released July 1, showed the slowest pace of growth in two years.

“PMI data today is showing perhaps the manufacturing sector in the U.K. is not that weak,” said Adam Myers, European head of currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London. “That’s why sterling is up a little bit against the dollar.”

The pound rose 0.2 percent to $1.5640 as of 11:35 a.m. London time, paring this week’s decline to 0.7 percent. Sterling was little changed at 71.06 pence per euro, 0.2 percent weaker since June 29.

U.S. financial markets are closed Friday for the Independence Day holiday.

Greek Turmoil

External factors such as the turmoil in Greece, coupled with speculation on when the Federal Reserve will raise U.S. interest rates, are driving short-term direction in the pound.

Greek voters are divided right down the middle heading into the July 5 referendum on European bailout proposals, according to a Bloomberg poll.

“Euro-sterling has been mainly dominated by the Greek referendum on Sunday,” Credit Agricole’s Myers said. The pound has weakened against the dollar in the last two weeks because “people still expect the Fed to tighten policy before the Bank of England.”

U.K. government bonds rose for a second day. Benchmark 10-year gilt yields fell two basis points, or 0.02 percentage point, to 2.06 percent. The 5 percent bond due in March 2025 climbed 0.215, or 2.15 pounds per 1,000-pound face amount, to 125.70.

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