Pound gains forecast to be short-lived as GBP/EUR pushes into mid-1.17 on the back of good data

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"Today’s calendar has brought the UK manufacturing update, from which we have seen a very welcome boost," says Richard Driver at Caxton FX.

A strong rise in new orders helped Britain's manufacturing sector grow at its fastest pace in over a year last month, Markit said.

Manufacturing PMI hit a 14-month high in May of 51.3, up from an upwardly revised 50.2 in April. Analysts had forecast a reading of 50.1.

But, Eurozone PMI also beats expectations

Supporting the euro today was a consensus-beating PMI result from the Eurozone.

Markit's Eurozone Manufacturing Purchasing Managers' Index rose to 48.3 in May from April's 46.7, coming in ahead of an earlier flash reading of 47.8 but spending its 22nd month below the 50 level that divides growth from contraction.

The reading is the highest since February 2012 and is the first time the downturn has eased in four months; this has helped put a floor under the pound to euro exchange rate.

GBP strength not assured

Is this the start of a trend higher for sterling? Not so says one analyst:

"So with further positive GBP news we could see more currency strength, although forecasters think any gains will be short lived as it is unknown what effect Mark Carney will have when he comes to the helm of the BoE on July 1st. If you are in the market to sell GBP, taking advantage of any short term upside could well be advisable," says Marc Morley-Freer at Smart Currency Exchange.
Ahead this week we still have PMI data from the services and construction industries.

Then, the Bank of England meets again this week in what will be the last such meeting for Governor Sir Mervyn King before Mark Carney takes over in July.

"As a result, it would be a surprise if there is any change to the base interest rate level or the current asset purchase facility," says Charles Purdy, Director of Smart Currency Exchange.