Sterling steadies as traders await post-referendum construction survey
LONDON : Sterling trod water against the dollar and euro on Tuesday, as traders awaited a survey from the construction sector that will provide more evidence of how Britain’s economy is performing since its vote to leave the EU.
The equivalent survey of purchasing managers (PMI) in the manufacturing sector for July 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 – another hint of an economic backlash from June’s Brexit vote.
The construction PMI is due at 0830 GMT and will be the penultimate piece of data the Bank of England sees before it makes a policy decision on Thursday.
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 construction PMI is a bit more interesting than usual, in that every post-referendum indicator takes on a bit more significance, and construction is a sector which probably is going to be hit particularly hard,” said RBC Capital Markets currency strategist Adam Cole.
The PMI for the services sector is due on Wednesday.
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 climbed a quarter of a percent to $ 1.3208 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 down 0.1 percent to 84.82 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.”
