REFILE-Stg at 1-mo high vs euro; UK data brightens outlook

Fri Nov 2, 2012 4:58pm IST

* Sterling hits one-month high versus the euro

* U.S. employment data at 1230 GMT to dictate currency moves

* Better data lowers bets on more stimulus by the BoE

By Anooja Debnath

LONDON, Nov 2 (Reuters) - Sterling rose to a one-month high against the euro on Friday, helped by better-than-expected UK construction activity data that added to optimism about a sustained economic recovery.

The euro fell 0.3 percent against the pound to hit 79.965 pence, its weakest since Oct 3. Euro zone exporter bids are cited at 79.80/90 pence, traders said, with losses in the euro likely to gather pace if it closes below its 55-day moving average of 80.09 pence on Friday.

In contrast to the upbeat UK report, data showed euro zone manufacturing shrank for the 15th month running in October as output and new orders fell.

The Purchasing Managers' Index (PMI) for construction activity in the UK rose above expectations to 50.9, which indicated expansion in the sector, but firms remained cautious about future growth, according to the survey.

"Today's data has restored and refreshed sterling's post third quarter GDP rally," said Nawaz Ali, UK market analyst with Western Union Business Solutions.

"Weak manufacturing PMI data yesterday had led traders to question the sustainability of any recovery going into the fourth quarter but today's data is certainly a positive surprise."

Data last week showed the UK economy had climbed out of recession although there are doubts about the underlying strength of the economy.

Ali said the market focus would turn to the U.S. employment figures due at 1230 GMT on Friday and going forward to the presidential elections.

A better-than-expected jobs report could boost risk appetite and sterling while a disappointing number could hurt the pound and the euro.

"The dollar tends to weaken if we see better data and there is a chance we could see some euro weakness after the data," said Peter Kinsella, currency strategist at Commerzbank.

The euro has been under pressure as the crisis in the currency bloc rages on and a Greek court ruled the country's austerity measures may be unconstitutional, raising concerns about Athens' ability to implement austerity measures needed to secure bailout money.

Sterling slipped against a broadly stronger dollar before the U.S. jobs data. The pound was down 0.2 percent against the dollar to $1.6094. Near-term support is seen at its 55-day moving average of $1.6035 while offers are layered above $1.6130.

The pound has been in demand from Asian central banks and other long term investors in recent days following hopes the UK recovery will gather pace and douse expectations of more easing.

Friday's UK construction figures followed a recent slew of better-than-expected consumer credit, mortgage, CBI retail sales apart from the forecast-busting growth data.

Comments from BoE deputy governor Charlie Bean on Wednesday chimed with a recent lowering of expectations that the central bank will opt for more quantitative easing (QE) next week, providing support for the pound.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Popularity Poll

REUTERS SHOWCASE

Record Highs

Record Highs

Nifty touches record high; software stocks gain.  Full Article 

New Adviser

New Adviser

Arvind Subramanian likely to be chief econ adviser.  Full Article 

Pricing Mechanism

Pricing Mechanism

Govt sets up a four-member panel to re-examine gas pricing.  Full Article 

Royalty Rates

Royalty Rates

India to hike iron ore royalty, miners may struggle to pass on extra cost.  Full Article 

Diesel Deregulation

Diesel Deregulation

Oil ministry to seek Cabinet nod on diesel deregulation - sources  Full Article 

Commodities

Commodities

Gold near two-month low; set for weekly drop on interest rate fears  Full Article 

Reuters Exclusive

Reuters Exclusive

Apple iPhone 6 screen snag leaves supply chain scrambling   Full Article 

Helping Regional Mills

Helping Regional Mills

Govt raises sugar import duty to 25 pct from 15 pct.  Full Article 

Curbing Risks

Curbing Risks

RBI to lower ceiling on bank loans to a single corporate group.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage