The Pound Sterling exchange rate softened against a number of peers on Friday following the release of disappointing construction data out of the UK.
The Pound Sterling to Canadian Dollar (GBP/CAD) exchange rate traded in the region of 1.8908
Economic data published by the London based Office for National Statistics (ONS) showed that the UK’s construction sector suffered its largest contraction in over a year in the first month of the year as winter weather led to a sharp decline in house building.
The report showed that construction output slipped -2.6% in January compared to the preceding month. The figure was far worse than the growth of 1.3% forecast by economists. The fall came as house-building activity tumbled by 5%, the sharpest fall recorded since February 2014.
Strangely, Friday’s data is in sharp contrast to the recent Construction Purchasing Managers Index (PMI) released earlier in the month, which showed that activity in the sector improved in February. The PMI rose from 59.1 to 60.1, a number that is well above the 50 mark that divides contraction from expansion.
‘While there is little doubt that activity in this sector remains robust, this data series is erratic, subject to hefty revisions, and all too often at odds with other indicators and anecdotal evidence, which is why it was downgraded from an official statistic from last year,’ said Marc Ostwald from ADM Investor Services.
Also putting pressure on the Pound were comments made by Bank of England Governor Mark Carney who said in the previous session that interest rates could remain lower for a longer period. Carney added that deflation is unlikely to set in but cautioned that the recent rise in the value of the Pound Sterling and the fall in inflation could continue to put pressure upon the UK’s consumer price index.
Against the Euro the Pound continued to trade weaker as investors continued to take profits following Sterling run to a fresh 7-year high against the single currency. The GBP/EUR exchange rate was trading in the region of 1.39.
Against the US Dollar the Pound was trading in the region of a 20-month low as market attention now turns to next week’s US Federal Reserve policy meeting. The GBP/USD exchange rate was trading in the region of 1.48.
Against the Canadian Dollar, the Pound was softer but losses were restrained, as crude oil prices remained weak due to concerns over US inventories. The GBP/CAD exchange rate was trading in the region of 1.88.
