Pound extends gains on US dollar

The pound extended its gains against the US dollar yesterday, after largely positive economic data from the US supported market sentiment amid lowered expectations for more Federal Reserve monetary easing.

The sterling reached $1.5960 in morning trading in the US, subsequently consolidating at $1.5966, rising 0.31 per cent, reported forex-rateit.com. Cable was expected to find resistance at Wednesday’s high of $1.5991 and support at the low from 14 November of $1.5880.

The US Department of Labor had earlier said that claims for state unemployment benefits dropped to 351,000, holding steady close to its lowest level since almost four years ago. Separate reports revealed that the US core personal consumption expenditure index increased in line with the market expectations in January, while personal income and personal spending both increased less than expected.

But the US Institute for Supply Management revealed that there was an unexpected fall in its purchasing managers’ index to 52.4 last month from January’s reading of 54.1. The data came just a day after Ben Bernanke, the chairman of the Federal Reserve, lowered expectations for a third wave of monetary easing after he acknowledged that there had been an improvement in the labour market recently and said higher oil prices may push up inflation.