BRUSSELS (Alliance News) - The pound spiked up against its key counterparts in European deals on Tuesday, as European shares rose on M&A talks, and downbeat Chinese manufacturing data strengthened expectations of more monetary stimulus.
London Stock Exchange Group soared 7.5% after Intercontinental Exchange confirmed that it is considering making an offer for LSE, which is in talks over a potential merger with Deutsche Boerse.
Europe's manufacturing sector expanded at the slowest rate in a year in February, adding pressure on the European Central bank to unveil another round of stimulus next week. The Markit's manufacturing PMI for the euro zone dropped to 51.2 from January's 52.3
While China's manufacturing activity continued to contract in February, service sector growth slowed to lowest since December 2008, separate reports showed today, raising hopes that Beijing may ramp up stimulus to boost growth.
Investors cheered the PBoC decision to cut the amount of cash that commercial banks should set aside as reserves by 50 basis points to boost the economy.
Oil prices were higher in the wake of China's decision to cut the reserve requirement for banks and Saudi Arabia's pledge to work with all main crude producers to limit market volatility.
In economic front, data from Markit showed that the UK manufacturing sector expanded at the slowest pace since early 2013 in February.
The Chartered Institute of Procurement & Supply/Markit Purchasing Managers' Index fell more-than-expected to 50.8 in February from 52.9 in January. This was the lowest reading since April 2013.
The pound has been higher against most major rivals in Asian deals, amid a rally in Asian shares following the Chinese central bank's easing.
In European deals, the pound strengthened to weekly highs of 1.4015 against the franc and 158.72 against the yen, from its early low of 1.3883 and 5-day low of 156.13, respectively. The pound is seen finding resistance around 160.00 against the yen and 1.42 against the franc.
The pound advanced to a 4-day high of 1.4018 versus the greenback and an 11-day high of 0.7757 versus the euro, after having fallen to 1.3908 and 0.7821, respectively in early deals. On the upside, 1.42 and 0.76 are possibly seen as the next resistance levels for the pound against the greenback and the euro, respectively.
Looking ahead, Canada GDP data for December, Markit's US manufacturing PMI for February and the ISM's manufacturing PMI for February and US construction spending data for January are due to be released in the New York session.
At 9:05 am ET, European Central Bank executive board member Sabine Lautenschlaeger is expected to speak at the GARP 17th Annual Risk Management Convention in New York.
