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Bullish manufacturing data from the UK and China coupled with strong equity markets gave risky assets a boost yesterday as signs that global recession may be tempering spring new every day.

As we predicted yesterday the UK manufacturing PMI figure was better than expected although still in contractionary territory; we would hope to see some expansionary numbers by mid Q3. Chinese PMI was also strong which allowed global assets to extend. The afternoon’s data from the US was also supportive with both construction spending and the ISM manufacturing figures coming on nicely.  While the mood is good at the moment I do not share some people’s views that it’s Christmas in June and that we should deck the halls with stocks and bonds.

There will be a snapback in the market soon. Profit taking on positions that have been extending over the past couple of weeks has already started. Sovereign wealth funds that propped up ailing financial firms with billions of dollars of investment are now looking for new areas to invest. IPIC, the Abu Dhabi royal family’s investment vehicle, is looking to sell its £3.56bln investment in Barclay’s. The shares have a convertible value of 153p and will probably be bought between 260p and 300p netting the fund a chunky profit.

In the short term this could undermine Barclay’s and therefore the pound as investors worry over the capital adequacy that the bank will be left with. Barclay’s was one of the banks that has not taken funds from HM Treasury nor failed the FSA’s recent stress tests and as such has enjoyed a time in the spotlight. Sterling has fallen against the dollar by 0.3% and 0.1% against the euro since the announcement.

Today is a UK centric data day with PMI construction due alongside mortgage approvals at 09.30 BST. We expect main movement to be determined by equity markets.

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Please feel free to contact me jeremy.cook@worldfirst.com(jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange on 020 7801 9050 or ourPrivate Client Currency Exchange on 020 7801 9080. Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms..

To view any past or present currency blogs please click on the following link www.worldfirst.com/blog