Market report: Construction PMI can’t save GBP
Sterling extended its losses against both the euro and dollar on Thursday. This is despite a stronger than expected Construction Purchasing Managers Index (PMI). The Construction PMI is a diffusion index incorporating survey results provided by UK construction firms.
The Construction PMI rose to 61.7 from 53.3, a six-year high. However, the news mostly failed to move sterling. Likely because construction only accounts for a small portion of UK GDP.
Sterling is now trading almost 2% lower against both the euro and dollar than earlier this week. UK medical regulators’ pledge to restrict distribution of the AstraZeneca vaccine has seemingly dented investor confidence in the vaccination rollout. The jab has been linked to a minute number of blood clots.
This UK’s efficient vaccination rollout had benefited sterling due to investor assumptions that vaccinations ultimately lead to a quicker economic rebound. This recent snag puts that recovery under threat. Investors are now looking optimistically towards the US and Eurozone, where economic recoveries are expected now both are on track to meet their summer vaccination targets.
The dollar traded lower against the euro and a host of other currencies yesterday, despite strengthening against sterling.
The drop follows news that unemployment benefit claims rose to 744,000 last week, over 60,000 more than economists predicted.
US Federal Reserve speakers also vowed to keep monetary policy accommodative. Fed chair Jerome Powell stated inflation is likely to be temporary and that policy will not shift until there was at least a month long string of good data. St Louis Fed President James Bullard added that changes shouldn’t even be discussed the pandemic is over.
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