British Pound (GBP) Exchange Rate Firms; Construction Data Accelerates at 11-Year High
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The Pound has witnessed its fourth week of depreciation against the US Dollar as UK figures have proved less favourable recently.
However, the UK has seen the Construction Purchasing Managers Index figures published this morning, which beat forecasts of 62.0 rising instead to 62.4. Monday’s statistics have showed more than anticipated productivity; figures reaching over 50 demonstrate expansion in the economy. Today’s figures however, have shown the fastest acceleration in UK home building recorded since 2003.
Such favourable figures could see the Pound maintain some stability in the currency market ahead of this week’s Bank of England (BoE) meeting to discuss the Rate Decision and Asset Purchase Target.
The BoE is currently shrouded by speculation regarding interest rate hikes in the UK, with some economists forecasting that the rise could materialise this side of Christmas.
Economist Michael Saunders stated: ‘We expect the jobless rate will continue to fall rapidly, with the Bank hiking earlier and further than markets project.’
If some BoE policy makers do decide to vote in favour of hikes, the UK could be the first of the developed nations to raise their interest rates since the recession in 2009. Furthermore the Pound will gain if the central bank decides that the UK economy is feasibly strong enough to maintain such hikes.
As Sterling has sunk in recent weeks versus the US Dollar, it has quelled the fears of some large-scale businesses that declared such a strong currency posed difficulties for profit margins.
British Chambers of Commerce (BCC) spokesperson John Longworth commented: ‘The recent rise in Sterling has made life more difficult for both new and experienced exporters, and further strengthens the case against a premature rise in interest rates. Early rate rises may limit the growth ambitions of the very firms we are counting on to drive the rebalancing of the economy.’
However, speculation is mounting regarding the US interest rate hikes, with some believing that the US will raise rates sooner than the UK.
Expert in the field Marc Ostwald commented: ‘The risk with the Fed is that they are forced to bring their time line forward. In the UK, on the other hand, it all looks quite pretty, but scratch below the surface and there are a number of issues.’
Thursday will prove the most influential day for the Pound this week with the currency market eagerly awaiting information regarding the interest rate hikes. However, Tuesday will see the publication of UK Composite and Services PMI, whilst Wednesday will reveal Industrial and Manufacturing Production figures.
The US Dollar is currently trading down against the Pound at 0.5945, reaching session highs of 0.5947.