British pound reached a session high against the US dollar on Monday, recovering from two-week lows, after an official report showed that activity in the sector of construction in the United Kingdom expanded at the fastest pace in six years in October.
GBP/USD touched a session high at 1.5972 at 11:00 GMT, after which consolidation followed at 1.5969, gaining 0.26% for the day. Support was likely to be received at current session low and also a two-week low, 1.5902, while resistance was to be encountered at November 1st high, 1.6045.
According to data by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS), the index, gauging construction activity in the United Kingdom, has climbed to reach its highest level since September 2007 in October. Construction PMI rose to a reading of 59.4 in October, as in September it stood at 58.9. Septembers result was a little bit lower than the almost six-year high at 59.1, registered in August. This data implied that supply of homes in the country continued to increase, while government initiatives, striving to provide access to cheaper lending for consumers, have facilitated the ongoing increase in house prices. According to Markit, construction activity in UK cities remained close to the highest levels ever recorded.
“The data is suggesting that the economy is about as good as it can get,” said Gavin Friend, a currency strategist at National Australia Bank Ltd. in London, cited by Bloomberg. “The U.K. is looking better than Europe and the U.S. There’s not much further it can go. We should see a renewed downward focus on the euro against sterling because people are starting to think about the growth divergence.”
At the same time, nations Gross Domestic Product accelerated to the fastest in more than three years during the third quarter, as recovery has been maintained across all major industries. The Confederation of British Industry (CBI) revised up its forecast for UK economy yesterday and now suggests an expansion of 1.4% during 2013 and 2.4% during 2014. The CBI had projected a 1.2% growth in 2013 and a 2.3% growth in 2014 in August.
The yield on UK 10-year gilts rose to 2.66%, after it fell to 2.52% on October 31st, marking the lowest level since August 13th, Bloomberg imparted.
Meanwhile, the greenback received strong support earlier on Monday after Federal Reserve Bank of Dallas President Richard Fisher said earlier in the day that the central bank needed to pare back its record stimulus as soon as possible. At a business conference in Sydney he also underscored that corporate balance sheet results in the United States appeared to be stronger than ever. Any scale back of the monetary stimulus by Fed was to correspond entirely with economic data, according to Fisher. He expressed concerns over the possible threat, which may occur, as a result of bank’s loose monetary policy, in case companies’ balance sheet results begin to normalize.
US dollar also received a boost after the Institute for Supply Management (ISM) reported on Friday that the index, gauging manufacturing activity in the United States, rose to a reading of 56.4 in October, or the highest point since April 2011, following a reading of 56.2 in September. Experts had anticipated that the index will slow down to 55.1 in October. This data reinforced the view of a possible sooner than expected scale back of Federal Reserve Bank’s quantitative easing.
Elsewhere, the pound was higher against the euro, with EUR/GBP cross losing 0.13% on a daily basis to trade at 0.8459 at 11:53 GMT. GBP/JPY pair was gaining 0.30% to trade at 157.65 at 11:55 GMT.