Pound Erases Yesterday’s Gains

The Great Britain pound declined today after it jumped yesterday as unexpected rise of the house prices and the record manufacturing PMI lead to the speculation the central bank will increase the interest rates.
The Nationwide Building Society House Price Index increased by 0.3 percent in February from January. The index fell by 0.1 percent in January and was expected to decline even more — by 0.2 percent. The seasonally adjusted Markit/CIPS UK Manufacturing PMI posted 61.5 in February, unchanged from the January record high level. A reading above 50.0 indicates industry expansion, and the index has remained above this level for nineteen successive months.
The good reports caused the speculation that the good heath of Britain’s economy warrants an increase the interest rates. Some analysts argue against such outlook. David Bloom, global head of foreign-exchange strategy at HSBC Holdings Plc, commented on the gains of the pound, before the decline of the currency:

The interest-rate argument is pushing sterling higher. We would resist that temptation. We think sterling is going to retrace its gains. If they raise interest rates it’ll be a mistake.

For now it looks like this forecast was correct.
GBP/USD dropped from 1.6264 to 1.6233 today as of 7:47 GMT after it jumped yesterday to 1.6328. GBP/JPY advanced from 0.8469 to 0.8480 after yesterday’s decline to 0.8459.

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