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A Yearly High in UK Construction Fails to Stop a Pound Tumble

By Benjamin Spier
02 July 2013 09:20 GMT

THE TAKEAWAY: UK PMI for construction rises to a yearly high -> Positive economic indicator comes days ahead of Carney’s first BoE meeting -> Pound tumbles along with equities

The UK Purchasing Managers’ Index for construction reached a yearly high of 51.0 in June, but the PMI failed to beat expectations for 51.2 and therefore did not boost the Pound in Forex trading. The construction PMI was reported above the 50.0 neutral line for the second month, following the 50.8 index report in May.

Markit reported that a solid rate of new order growth lead to higher output level, and employment levels in the construction sector rose over the month. Markit also stressed the importance of an upbeat economic release just days before the BoE’s first meeting with Marc Carney as Governor. “The improvement in overall construction output simultaneously raises chances of strong second quarter UK GDP growth, and reduces the likelihood of imminent additional policy stimulus,” said Markit Senior Economist Tim Moore.

However, the Pound declined about 25 points against the US Dollar following the release and fell below the 1.5200 level, likely due to a further fall in European equities, which was also reflected in Euro trading. GBP/USD may find resistance around 1.5150, by a rising trend line from March.

There was little other news during the European session, which saw an announcement of a slight annual decline in Euro-zone producer prices in May.

At the beginning of the European session, the Reserve Bank of Australia left the target rate interest rate unchanged, but drove the Aussie slightly lower with talk of further easing.

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GBPUSDDaily: July 2, 2013

A_Yearly_High_in_UK_Construction_Fails_to_Stop_a_Pound_Tumble_body_gbpusd.png, A Yearly High in UK Construction Fails to Stop a Pound Tumble

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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02 July 2013 09:20 GMT