BRUSSELS (Alliance News) - The British pound continued to be strong against the other major currencies in the early European session on Tuesday, after data showed that UK economy expanded at a faster pace in the second quarter largely driven by an improvement in services output.
Data from the Office for National Statistics showed that UK gross domestic product grew 0.7% sequentially, in line with forecast, following a 0.4% rise in the first quarter. Services expanded 0.7% and production increased 1%. While construction growth showed flat growth, agriculture contracted 0.7%.
GDP was 2.6% higher in the second quarter compared with the same quarter a year ago. Annual figure also matched expectations.
Another report from ONS said the latest index of services suggested that output increased by 0.3% in May from April, when it climbed 0.2%. The monthly growth rate came in line with expectations. On a yearly basis, services output advanced 2.7%.
The focus also remains on the two-day US Federal Reserve meeting that begins later in the day. Analysts do not expect the Fed to raise interest rates before September but traders will be scrutinizing the statement for any hints about the timing of the first rate hike.
Meanwhile, the European stocks traded higher, lifted by company earnings results and M&A activities. The investors watch the Chinese stocks, as the stock market turmoil in China caused ripple effects across global equity and commodity markets on Monday. Chinese shares wavered between gains and losses today as authorities scrambled once again to stave off a full-blown market collapse.
The People's Bank of China said on Tuesday it would inject 50 billion yuan ($8.05 billion) into the money markets via open-market operations in its biggest liquidity injection since July 7. The central bank also hinted at further monetary easing using "various monetary tools" to help ease fears about the impact of stock market volatility on the broader economy.
The currency traded higher in the Asian trading.
In the early European trading now, the pound rose to a 6-day high of 1.5032 against the Swiss franc and a 5-day high of 192.59 against the yen, from early lows of 1.4946 and 191.44, respectively. If the pound extends its uptrend, it is likely to find resistance around 1.52 against the franc and 194.50 against the yen.
Against the US dollar and the euro, the pound advanced to 1.5586 and 0.7096 from early lows of 1.5527 and 0.7129, respectively. The pound may test resistance around 1.56 against the greenback and 0.69 against the euro.
Looking ahead, Canada industrial product and raw materials price indices for June and US S&P/Case-Shiller home price index for May, Markit's preliminary US service sector PMI report for July and US consumer confidence for July are slated for release in the New York session.
