Sterling survived a rocky session versus the dollar on Tuesday to hold near 10-week highs against a basket of currencies and gain ground against the euro, shrugging off data that showed growth in the British construction sector slowing. The pound hit a 10-week high against the euro late in the European day, inching past highs hit on Monday after the monthly purchasing managers' index (PMI) for the manufacturing sector hitting its highest in 16 months.
That largely reflected the weakness of the euro, however, and an equivalent survey on construction showed growth slowing in October had helped prod the pound lower against the dollar earlier. "Cable opened the day higher before falling through the 55-day moving average about half an hour after the data this morning," said Tobias Davis, a currency hedging manager for Western Union in London, saying only a poor batch of US data had allowed sterling to recover.
"The range will be tight from here. $1.55 will remain sticky, with short term support around $1.5360. I'm waiting for (European Central Bank chief) Mario Draghi tomorrow and Super Thursday," he said. By 1700 GMT, the pound had gained half a percent against the single currency to 71.055 pence per euro, its strongest since late August. It was less than 0.1 percent lower at $1.5408 and steady at 93.4 against a basket of currencies.
"Super Thursday" has become a quarterly focus for UK markets, with the simultaneous release of the Bank of England's latest quarterly Inflation Report as well as an interest rate decision and the minutes from its latest Monetary Policy Committee (MPC) meeting. The central bank is expected to keep interest rates at their historic lows, with most economists expecting only MPC hawk Ian McCafferty to continue to vote for an immediate hike. But some reckon another of the nine MPC members could join him, with Kristin Forbes and Martin Weale seen as most likely.
Some analysts pointed to the fastest increase in new work in a year in the construction survey, and stressed the suggestions in the manufacturing survey that economic growth could pick up in the final quarter of 2015. "The construction data was a bit underwhelming, but overall we are still on track for 1 percent growth in the final quarter which is pretty good," said Richard de Meo, managing director at Foenix Partners, a company with offers currency hedging solutions to UK firms. "My money would still be on the Bank of England hiking rates sometime in the first half of 2016. Sterling is holding up pretty well because of that."
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