LONDON: Sterling rose more than 1 percent against the dollar on Tuesday to near its highest level for three weeks, as the greenback fell broadly on the view that weak US data would delay an interest rate hike from the Federal Reserve.
The pound had already risen 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.
By 1410 GMT it was 1.1 percent up on the day at $1.3325 , its strongest since July 15, as the dollar hit a five-week low against a basket of major currencies.
The greenback had been on its best run of weekly gains for 1-1/2 years until last week, when first a meeting of the Fed's rate-setting FOMC committee did not provide any near-term rate hike signal and then a much-weaker-than-expected set of US growth data sent it tumbling.
The latest numbers on Tuesday showed an important measure of US inflation measure - the core personal consumption expenditure index - grew by a modest 0.1 percent in June.
"Everyone had been quite positive on the dollar going into the FOMC and it didn't really deliver, so there's been a subsequent leakage of positions ever since," Altana currency fund manager Ian Gunner said.
"People are starting to pull back on their positioning in a market that's not that liquid anyway, so you can get some decent moves in any one day. It's basically holiday trading."
A monthly survey of purchasing managers in Britain's construction sector inched down to the lowest reading since June 2009, well into contraction territory.
Though the numbers were better than forecasts in a Reuters poll of economists, they nevertheless provided 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," RBC Capital Markets currency strategist Adam Cole said.
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 central 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.
Comments
Comments are closed for this article.