LONDON: Sterling ticked higher on Tuesday after a survey of Britain's construction industry came in slightly better than expected, despite showing the sector shrinking at its fastest pace in seven years.
The monthly survey of purchasing managers in the construction sector inched down to the lowest reading since June 2009, well into contraction territory. But the result was better than all forecasts in a Reuters poll of economists.
The numbers nevertheless provide another sign that Britain's economy is at risk of recession after June's vote to leave the European Union.
"The construction PMI is a bit more interesting than usual, in that every post-referendum indicator takes on a bit more significance," said RBC Capital Markets currency strategist Adam Cole.
The equivalent survey for the manufacturing sector brought worrying signs on Monday. It had been forecast to replicate the results of a one-off flash poll two weeks ago but instead was even weaker.
The construction PMI was the penultimate piece of data the Bank of England sees before it makes a policy decision on Thursday - the services PMI, due on Wednesday, will be the last.
The bank is expected to cut interest rates for the first time since 2009, and some are also forecasting it will announce a new bond-buying programme.
The pound has recovered almost 4 percent against the dollar since a dramatic 14 percent fall after the vote on June 23 to leave the European Union. It gained half a percent against a broadly weaker dollar to $1.3243 on Tuesday.
But sterling's modest recovery has not stopped investors from steadily building "short" bets against the currency and in favour of the dollar to their highest on record.
Against the euro, sterling edged up 0.1 percent to 84.62 pence, leaving it close to a three-week low of 84.875 pence touched on Monday.
"Sterling remains pressured after weak manufacturing PMI data showed the severity of what is expected to be the start of a prolonged slowdown," wrote Western Union's head of corporate treasury sales, Tobias Davis.
"Short bets against the currency are building, especially ahead of Thursday's rate decision."
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