UK Construction PMI Falls Farther into Contraction

Market Trends - 02/08/2016

Sterling rose against the US dollar after the latest iteration of UK construction data barely beat the forecast.   GBPUSD hit 1.3238 shortly after the new UK construction data from July was released, translating to a 0.33% in the pair. However, the gains should be taken with a grain of salt as the rise of the Pound over the dollar could be just a small correction after significant downward pressure over the last few weeks.  The data came less than 24-hours after the UK manufacturing PMI dropped to 48.20 from 52.10, the lowest reading since February of 2013.

The new UK construction data released earlier showed that the sector dropped to 45.9 in July from the 46.0 recorded a month prior. The modest jump of the Pound over the dollar during the morning session appears to be a byproduct of the June construction data being bad but not as abysmal as predicted; with the preliminary reading at 43.8 stoking widespread fear and speculation of a deeper rout.  The spike in the Pound also has to do with the fact that the United States is dealing with the repercussions of poor fundamental data delivered over the course of the last week. The pace of US economic activity looks a bit fragile after the advance reading of second quarter gross domestic product last week displayed 1.20% annualized growth, well below estimates of 2.60% expansion.


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