Tag Archive | "Sterling Pound"

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Construction Sector Slowdown Weighs On Pound Sterling

Pound sterling gains were halted in the overnight following the release of the Markit/CIPS UK construction PMI survey.  Although still relatively positive, survey results were worse than had been anticipated by analysts, leaving some still skeptical of any short term UK economic recovery.  As a result, the British pound traded slightly lower to yesterday’s high at 1.5841 against the US dollar.  The exchange rate hit as high as 1.5869 in midday trading yesterday.

According to the construction sector survey, index readings dipped to a 51.4 in January – below the December 53.2 mark.  Although this is the 13th consecutive month of gains, the figure stands as the weakest reading in 4 months and compounds fears that the recession isn’t just over yet.  Notably, however, today’s survey findings still portend to a thin silver lining for Europe’s second largest economy.  According to subcomponent readings, confidence among construction companies and business leaders continues to be optimistic – although the same companies are unlikely to add to current payrolls.

The recent round of optimism seems to have been spurred on by improving month to month comparisons in recent weeks.  Notably, manufacturing sector activity improved to an 8-month high, while confidence among consumers recovered to the highest in almost the same time period.

Given the overwhelming and rising optimistic sentiment, today’s results may be temporary as traders begin to shift their sentiment to a potential turnaround in the UK economy.  This should support the current sterling momentum – if at least for another session or two.

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FX Market: Euro, Pound Boasts; Canadian Dollar Coasts

Both euro and sterling pound experienced upside momentum during the session, helped by an improvement in regional U.S. manufacturing data. According to the Institute for Supply Management – Chicago report, business activity ratcheted higher in the month of August. The report sparked some signs of economic recovery as the reading increased to the pivotal 50 figure, higher than the 43.4 posting experienced in July.

Even more surprising were upticks in the separate components creating the overall index. Orders climbed to the highest level in a year as the employment index jumped a solid 3.4 points higher to a reading of 38.7. The month’s results support nothing but optimism on the idea that the world’s largest economy may be on the mend following one of the deepest recessions in decades.

However, given rather tepid data support in recent months (ie manufacturing, employment and confidence),  results for August may be subject to a downgrade next month as additional reports have cued in on a more pessimistic outlook. As a result, traders will likely take today’s results with a grain of salt, while looking ahead to potentially more concrete evidence through this week’s non-farm payroll report.

Expectations are for an optimistic loss of only 250,000 jobs in the economy.


Canadian Dollar Suprise

Although traders saw a less than expected rise in Canadian GDP, the fact that the figure rose in positive territory helped to boost a rather strong bid tone for the underlying Loonie. For the first time in almost a year, Canadian growth actually increased by 0.1 percent in the month of June, according to Statistics Canada.

What was especially positive about the figure is the fact that overall annualized growth has now improved to a mere contraction of 3.4 percent. This is almost 50 percent lower than the 6.1 percent contraction seen in the first quarter of this year. Helping to put the nation into the black was a rebound in consumer spending and a housing market that reheated following rescue measures implemented earlier in the year.

Incidentally, the current situation bucks what was previously expected for growth even as exports and business investment took a bit of a nosedive in the three month period. Ultimately, those bullish the Canadian dollar won out on the day as the currency continued to be bid higher following the announcement – the currency rose from an intraday low of 1.1091 to just below the 1.0950 figure.

More bidding is expected in coming weeks as the Canadian economy continues to remain one of the few economies that are expected to arise from the ashes in the coming quarter, earlier than other industrialized counterparts.

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