The British pound may have rallied almost 1 percent against the US dollar, but the currency ultimately fell against most of the rest of the majors despite broadly better-than-expected UK data. The Bank of England’s measure of mortgage approvals rose more than anticipated to a one-year high of 43,201 in May while the Markit Economics Purchasing Managers’ Index (PMI) for the construction sector jumped to a 13-month high of 45.9 in May from 38.1. All told, the data adds to evidence of stabilization in the housing sector and also suggests that the Bank of England will leave rates unchanged on Thursday for the third straight month at an all-time low of 0.50 percent. Ultimately, how the British pound responds to the rate decision will likely depend on the BOE’s QE stance in their policy statement. Signs that the BOE may increase their gilt purchases could weigh heavily on the British pound, especially against the euro, while the opposite (steady rates, no QE expansion) could provide a boost to the UK’s currency, though the markets are just as likely to show no reaction in this case.
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