GBP/USD trades close to yesterday’s 27-month highs on upbeat UK Construction PMI data

On Tuesday, the sterling traded close to yesterdays 27-month high against the US dollar, after the UK Chartered Institute of Purchasing and Supply (CIPS) released upbeat Construction PMI data.

GBP/USD hit a session high at 1.6437 at 11:47 GMT gaining 0.49% on a daily basis, having reached 1.6442 at 00:25 GMT on Monday, the highest level since August 2011. Support was likely to be received at December 2nd low, 1.6343, while resistance was to be met at August 29-th 2011 high, 1.6454.

The UK Construction Purchasing Managers’ Index (PMI), rose to a value of 62.6 in November, the highest level since August 2007, compared to a reading of 59.4 in October. The results outstripped analysts’ estimates, which pointed a value of 59.0. The index is based on a survey among managers in the construction sector and measures the level of activity and is published by CIPS. A reading above 50 indicates expansion in the sector, while a reading below 50 indicates contraction. The indicator is closely watched by traders, because managers usually have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

Meanwhile, the British Retail Consortium (BRC) reported an unexpected decline in UK retail sales. Retail sales lowered the pace to a gain of 0.6% in November, compared to the same period a year ago. Last month the index of sales climbed 0.8%, while projections showed a 1.1% increase. The indicator seemed to have limited effect on the GBP/USD exchange rate.

Sterling advanced against all except one of its 16 major counterparts after appreciating to the strongest since January versus the euro yesterday, Bloomberg imparted.

The pound has gained 7.7% in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, while the dollar was little changed.

U.K. government bonds handed investors a loss of 3.6 percent this year through yesterday, according to Bloomberg World Bond Indexes, while U.S. Treasuries declined 2.5 percent.

Meanwhile, the Institute for Supply Management reported yesterday that manufacturing growth in the U.S. accelerated to the highest in 2-1/2 years. The ISM Manufacturing index surged to 57.3, defying analysts’ projections of a decline to 55.0 from 56.4 in October.

The report showed activity in the manufacturing sector expanded for a sixth consecutive month and the overall economy grew for the 54th straight month. The new orders, production, employment and inventories sub-indexes also advanced, while supplier deliveries slowed.

The New Orders Index increased in November by 3% to 63.6 and the Production Index jumped by 2% to 62.8. The Employment Index came in at 56.5, an increase of 3.3% compared to October’s reading of 53.2. This reflects the highest level since April 2012 when the Employment Index registered a reading of 56.8. Supplier deliveries fell to 53.2 from October’s 54.7.

Investors will also be keeping a close eye on the upcoming release of crucial U.S. economic data to further gauge whether the Federal Reserve will commence scaling back its monthly bond purchases earlier than expected.

On Thursday, December 5th, the preliminary US GDP for the third quarter is expected to be revised upward to 3.1%, up from initially estimated at 2.8% in October.

On Friday, December 6th, the Labor Department will release the keenly anticipated data on non-farm payrolls and rate of unemployment for November. According to analysts’ projections, numbers will probably show that US employers added 183 000 jobs in November, compared to 204 000 in October. This will be the largest annual gain in payrolls since 2005. Meanwhile, the unemployment rate is projected to lower to 7.2%, the same rate as in September and the lowest since November 2008.

Elsewhere, USD/JPY hit a session high at 103.38 at 4:35 GMT, which is the highest level since May 23rd. At 08:15 GMT the pair is trading near 6-month highs to trade at 103.11, gaining 0.17% for the day. Support is likely to be received at December 2nd low, 102.23, while resistance is to be encountered at May 23rd high, 103.56. AUD/USD reached a session low at 0.9058 at 4:35 GMT, after which consolidation followed at 0.9073, falling 0.36% for the day. Support was likely to be received November 29th low, 0.9056, while resistance was to be seen at December 2nd high, 0.9168.

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