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Buy the British Pound
It seems to be time to buy the British pound as the Bank of England contemplates raising interest rates. This is because the economic recovery is moving along in Britain. As noted in Investing.com, the British pound is trading at five year highs against the dollar.
The pound was trading close to its highest level in almost five years against the dollar on Wednesday, amid heightened expectations for a U.K. interest rate hike in the early part of next year.
GBP/USD pair is trading near 1.70. This is the best that the pound sterling has done against the greenback since the early fall of 2009. Traders are looking at a support to resistance range of 1.69 to 1.70. This good news for the GBP comes after a promising purchasing manager index as evidence of a continuing recovery.
Further Evidence of British Recovery
According to Reuters, the British purchasing manager’s index is up and surging output boosts manufacturing numbers:
Surging output and an influx of orders helped British manufacturing activity grow last month at a much faster rate than expected, a survey showed on Thursday, boding well for Britain’s swift economic recovery.
The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rose in April to 57.3, its highest reading since November, compared a March reading of 55.8 that was revised up from 55.3.
As we have often noted on these pages, a major factor in the value of a currency is the strength of the nation’s economy. As increased factory orders lead to higher production the GBP is likely to go up as well. The intermediate factor here is that the Bank of England is likely to raise interest rates within a year which has a direct bearing on the value of the British pound versus other currencies.