LONDON Sterling rose to a one-month high on Friday after a survey showed a downturn in Britain's construction sector was easing, boosting expectations that the economy is holding up well after the shock Brexit vote in June.
The pound extended gains after data showed U.S. jobs growth in August falling short of expectations, reducing the likelihood that the Federal Reserve will raise rates later this month. The dollar index was down 0.2 percent in London afternoon trade.
"With some surprisingly upbeat numbers from London suggesting the fallout from the Brexit vote on the UK economy is easing, the dollar fell sharply against the pound," said David Lamb, head of dealing at FEXCO Corporate Payments.
The Markit/CIPS UK Construction Purchasing Managers' Index (PMI) rose to 49.2 from 45.9 in July, still below the 50 mark dividing growth and contraction but beating all forecasts in a Reuters poll.
Sterling rose to $1.3350, its highest level since Aug. 3 and was on track for the third straight week, its best run since April. The euro weakened to a day's low of 83.945 pence, not far from a four-week low of 83.88 struck on Thursday.
The construction PMI followed data on Thursday that showed the British manufacturing sector staging one of its sharpest rebounds on record. The Markit/CIPS manufacturing PMI jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July.
"Focus now turns to the services PMI, due out on Monday. We expect the services print to follow suit and rise, perhaps enough to enter the expansionary territory, something that could keep sterling supported," said Charalambos Pissouros, senior analyst at IronFx Global.
Services is the dominant sector in the British economy and plays a far larger role than manufacturing and construction.
Sterling has performed reasonably well in the past few weeks, holding above a 30-year low of $1.2798 struck on July 8, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following British voters' decision in a June 23 referendum to back leaving the European Union.
Surveys earlier this week showing improved consumer confidence and a rise in British house prices in August have added to signs the economy is hold up well so far.
(Reporting by Anirban Nag; Editing by Catherine Evans)