The Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates declined on Tuesday in spite of some above-forecast UK data.
The British currency shed over 0.4% against the Euro and lost more than 0.5% against the US Dollar over the course of local trading in spite of the UK’s better-than-expected Markit Construction PMI.
The UK’s construction sector accounts for a nominal proportion of total economic growth when viewed in comparison with the nation’s services sector, but the improvement in the Markit index was still welcome, particularly since yesterday’s manufacturing measure disappointed.
The Construction PMI achieved 64.0 in August, up from 62.4 in July and beating estimates for a reading of 61.5.
The report detailed solid increases in all three of the main areas of construction and indicated that employment growth remained close to the record-high recorded in July.
However, there were some negatives to be aware of – including the fact that a shortage in skilled workers is worsening.
According to Markit economist Tim Moore; ‘A broad-based upturn in construction demand has created a boom in job creation this summer, as construction companies look to replace capacity lost in the aftermath of the recession. However, acute skills shortages meant that subcontractor charges rose at the fastest pace since the survey began in 1997. Meanwhile, sub-contractor availability fell at a survey-record pace, which could act to further ignite pay pressures in the short-term.’
The data offered little respite to the Pound and the GBP/EUR and GBP/USD exchange rates continued trending lower.
The Pound to Euro (GBP/EUR) exchange rate was little changed by the Eurozone’s Producer Price Index, which recorded a 0.1% month-on-month decline in July and was down -1.1% on the year.
The Pound to US Dollar exchange rate is likely to fluctuate in the hours ahead as the latest lot of US manufacturing figures are released.
Expectations that the US economic recovery is gathering momentum helped the US Dollar strengthen against the majority of its currency counterparts on Tuesday, causing forex strategist Greg Anderson to comment; ‘The Dollar is just slowly, quietly chipping away at every currency. This time around, the FX market has said ‘we are right. All the fundamentals are there for a stronger Dollar. We’re going to buy it.’
Pound Sterling to Euro and US Dollar Exchange Rate Forecast
The GBP/USD exchange rate could experience movement in response to tomorrow’s UK Markit Services/Composite PMI, the US MBA Mortgage Applications report and the US Federal Reserve Beige Book.
Volatility in the GBP/EUR exchange rate is more likely to be inspired by the Eurozone’s retail sales report.
Sales in the 18 nation currency bloc are expected to have increased by 0.9% on a year-on-year basis having declined by -0.3% on the month.
A surprising result may spark fluctuations.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trading in the region of 1.6523 while the Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2586.
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