News Column

Pound Extends Gain As UK Construction PMI Hits 4-month High

July 2, 2014

BRUSSELS (Alliance News) - The pound continued its advance against its major counterparts in European deals on Wednesday as the UK construction sector picked up momentum, with activity reaching a four-month high in June.

Data from Markit/Chartered Institute of Purchasing & Supply showed that UK construction PMI rose to 62.6 in June, signaling the strongest pace of overall output growth since February. The index was up from forecasts of 9.8, following a reading of 60.0 in May.

Stronger demand for new construction projects in turn led to a rapid increase in staffing levels, with the rate of job creation accelerating to its sharpest since the survey began over 17 years ago, the data revealed.

The pound advanced in early deals after data showed that UK house prices rose more-than-expected in June.

Data from Nationwide showed that UK house prices rose 1% month-over-month in June, more than the 0.5% increase expected by economists and the 0.7% rise recorded in May. This marked the fourteenth consecutive month of growth.

Upbeat manufacturing survey that hit more than a 3-year high of 57.5 in June boosted the pound yesterday also. Continued improvement in economic data also raised speculation for much better growth figures in the second quarter.

Traders await the US ADP private sector employment report, as well as the Fed Chair Janet Yellen's speech, due later in the day, for further clues on monetary policy.

The pound which closed yesterday's deals at 1.5213 against the franc rose to near a 2-week high of 1.5266. On the upside, 1.54 is seen as next possible resistance level for the pound.

The pound climbed to 0.7950 against the euro, its strongest since October 2012, from yesterday's closing quote of 0.7970. If the pound extends rise, it may find resistance around the 0.78 mark.

Producer prices in the euro area declined at a slower pace for the second straight month in May, in line with the expectations of economists, figures from Eurostat showed.

Industrial producer prices in the domestic market dropped 1.0% year-on-year in May, slower than April's 1.2% decline, in line with economists' expectations.

The pound spiked up to 1.7176 against the greenback for the first time since October 2008. This is higher by 0.2% from Tuesday's closing value of 1.7148. The pound may possibly find upside target around the 1.73 mark.

The pound resumed its advance to 174.34 against the yen, its strongest in 2014. The pound is likely to test resistance around the 175.00 mark. The pair traded at 174.07 at yesterday's close.

Besides ADP employment report, US factory orders data for May is due in the New York session.

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Source: Alliance News

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