Sterling given a boost as UK construction growth rebounds in January

Enrique Díaz-Álvarez04/Φεβ/2015Currency Updates


Broad Dollar weakness during the course of London trading yesterday caused the UK currency to climb substantially by 0.95% against its US counterpart, hitting its strongest position in almost a week.

Growth in UK construction companies rebounded in January having slumped towards the back end of last year. The flash PMI measure released by Markit showed activity in the construction industry grew more than expected as new orders piled in at the fastest rate in three months. The index rose from 57.6 in December to 59.1 in January while optimism in the industry increased for the first time since October, albeit it only marginally from December’s sixteen month low. Construction in the UK, which accounts for 6% of Britain’s economy, is still a considerable 8% below pre-financial crisis levels.

More data from Markit Economics this morning will see the release of the flash services PMI, which is expected to be the third industry in as many days to have registered an expansion in January.


The single currency soared against the Dollar on Tuesday afternoon, appreciating by 1.35% and reaching a twelve day high in the process. The Euro rallied after the Greek Government abandoned calls for a reduction of foreign debt and proposed ending a standoff with its official creditors by swapping the debt for new growth-linked bonds.

Unsurprisingly given the recent oil price slump, the measure of producer prices once again fell in the Eurozone in December. The Producer Price Index was down by an annualised 2.7%, its greatest drop since early 2010 and the sixteenth consecutive months of year on year declines. Producer prices for the month were down by a whole percentage point, marking the largest monthly decrease since February 2009. Italy dropped back into deflation in January after consumer prices plummeted by an annualised 0.6%. Tumbling energy costs caused a greater than expected dip in the measure, and was the steepest annual drop since way back in September 1959.

Today’s main focus will again be on Greece, as newly appointed Prime Minister Alexis Tsipras will meet with European Commission President Jean Clause Junker at 9.30am in Brussels.


A poor days trading for the US Dollar saw the currency fall against its major peers, with the US Dollar index finishing 1% down.

New orders for factory goods in the US declined for a fifth straight month in December according to the US Census Bureau. The Factory Orders measure followed up a 1.7% fall in November with a drop of 3.4% MoM in December. Even manufacturing inventories, which had previously experienced eighteen consecutive months of positive growth, printed 0.3% down, while unfilled orders at factories slipped by 0.8%, its first fall in ten months. The Redbook index, which represents retail sales growth, dipped by 3.5% MoM in January, although was 3.8% higher than the same time last year.

Today looks set to be a busy day for the US economy with a number of high profile announcements likely to cause a great deal of market volatility. The ISM Non-Manufacturing PMI at 3pm is preceded by employment change data and service sector growth in the early afternoon.

Rest of the world

The Australian Dollar (AUD) plunged to its weakest level since May 2009 after the Reserve Bank of Australia (RBA) slashed its benchmark interest rate by 25 basis points to a new record low of 2.25%. AUD sank, with RBA Governor Glenn Stevens reiterating the need for a weaker currency in order to achieve balanced growth for the economy.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.