LONDON, Nov 3 (Reuters) - Sterling held near 10-week highs on a trade-weighted basis and rose against the euro on Tuesday, shrugging off headline data that showed growth in the British construction sector slowing, with investors focusing on the brighter aspects of the survey.
Data released on Tuesday showed growth in Britain’s construction sector slowing in October after hitting its fastest pace in six months in September but the increase in new work was the quickest in a year. The CIPS/Markit construction Purchasing Managers’ Index (PMI) slipped back to 58.8 in October, in line with a Reuters poll of economists, from 59.9 in September.
That came a day after a similar survey showed the monthly purchasing managers’ index (PMI) for the manufacturing sector hitting its highest in 16 months and suggested 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. My money would still be on the Bank of England hiking rates sometime in the first half of 2016,” said Richard de Meo, managing director at Foenix Partners, a company with offers currency hedging solutions to UK firms.
“Sterling is holding up pretty well because of that.”
Sterling was steady against the dollar at $1.5410, and 0.25 percent higher against the euro at 71.27 pence per euro . It was not far from a 10-week high of 71.07 struck on Monday.
On a trade-weighted basis, it was trading 0.2 percent higher at 93.3, having hit a 10-week high of 93.5 on Monday.
Many traders and analysts will wait for Wednesday’s survey of the dominant services sector to gain a fuller picture of the pace of recovery in the UK.
The main focus of the week for currency traders, though, will be what is dubbed “Super Thursday”, when the BoE releases its 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.
“The solid number today should reiterate the positive trend in UK data of late and support sterling ahead of the Inflation Report and the minutes where we expect two dissenters voting in favour of a rate hike,” said Petr Krpata, currency strategist at ING, adding euro/sterling should move towards 71 pence. (Reporting by Anirban Nag; Editing by Alison Williams)