Investing.com - The pound was little changed on Tuesday after data showing that manufacturing activity in the U.K. slowed slightly in October, having risen overnight when Bank of England Governor Mark Carney said he would extend his term.
GBP/USD was trading at 1.2248 from around 1.2255 ahead of the release of the factory data.
Sterling hit highs of 1.2281 overnight, the highest since October 20, after BoE head Mark Carney said he would extend his stay at the bank for an extra year, until Brexit negotiations have concluded at the end of June 2019.
Carney had the option to remain in his post until 2021, but has faced criticism following his pre-referendum warnings that a Brexit vote could push the U.K. economy into an immediate recession.
Prime Minister Theresa May welcomed the announcement, saying it would provide "continuity and stability" while Britain negotiates its EU exit.
Sterling showed little reaction after data on Tuesday showed that manufacturing activity maintained a solid rate of expansion at the start of the fourth quarter.
The Markit U.K. manufacturing purchasing managers’ index came in at 54.3 in October down slightly from 55.4 in September.
Economists had expected a reading of 54.5.
The report showed that the slump in the pound since the Brexit vote in June is helping the manufacturing sector by boosting export orders, but is also driving up the cost of imports.
Manufacturers experienced one of the fastest rises in average costs for raw materials in the 25-year survey history, which is likely to feed through to shop prices.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slid to 98.2 as investors weighed the Federal Reserve monetary policy announcement, Friday’s U.S. employment data and the upcoming U.S. presidential election.
Investors were looking to Friday’s U.S. jobs report for October for signs that the economy is on a strong enough footing to handle an interest rate hike this year.
The Fed will make its latest monetary policy announcement later Wednesday, but a rate hike ahead of the November 8 presidential election is seen as unlikely.