LONDON: Sterling rose to a day's high on Friday after a survey showed a downturn in Britain's construction sector was easing, boosting expectations that the economy is holding up well after the shock Brexit vote in June.
The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) rose to 49.2 from 45.9 in July, still below the 50 mark dividing growth and contraction but beating all forecasts in a Reuters poll.
Sterling rose to a high of $1.3295, up from around $1.3275 before the survey was released. It hit a four-week high of $1.3318 on Thursday and was last trading at $1.3270, unchanged for the day. The euro weakened to a day's low of 84.16 pence, having traded at 84.29 pence beforehand.
The construction PMI followed data on Thursday that showed the British manufacturing sector staging one of its sharpest rebounds on record. The Markit/CIPS manufacturing PMI jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July.
"Sterling/dollar spiked higher on the news, but quickly found fresh sell orders," said Charalambos Pissouros, senior analyst at IronFx Global. "Focus now turns to the services PMI, due out on Monday. We expect the services print to follow suit and rise, perhaps enough to enter the expansionary territory, something that could keep sterling supported."
Services is the dominant sector in the British economy and plays a far larger role than manufacturing and construction.
US non-farm payrolls data, due at 1230 GMT, will also be key to how well sterling holds up against the dollar. Employers are expected to have added 180,000 jobs in August, according to the median estimate.
Sterling has performed reasonably well in the past few weeks, holding above a 30-year low of $1.2798 struck on July 8, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following British voters' decision in a June 23 referendum to back leaving the European Union.
Surveys earlier this week showing improved consumer confidence and a rise in British house prices in August have added to signs the economy is hold up well so far.
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