The British pound is higher against the US dollar on Tuesday, getting a boost from some much-needed improvement in UK construction activity. The pound fell out of bed on Monday after comments from the UK Prime Minister Boris Johnson increased Brexit anxiety in currency markets.
GBP/USD was higher by 20 pips (+0.15%) at 1.3016 with a daily price range of 1.294 to 1.302 as of 1.30pm GMT. The currency pair remains stubbornly attracted to the 1.30 handle, which is acting as a magnet to any inclines or declines in the price.
GBP/USD – Construction data showed pickup in business confidence inside the construction sector
Aside from the risk that a Canada-style FTA could create a lot of headaches for businesses adjusting to new rules outside the EU, fears were mounting that a ‘Boris bounce’ in the economy would never happen. If post-Brexit trade negotiations get off to a sticky start, business investment might not provide the hoped-for oomph to the economy.
The pickup in business confidence happened with the UK Government having said ever since the election that it is seeking a Free Trade Deal with the European Union. The Markit construction PMI rose to 48.4 higher than the 46.6 expected and well up from the 44.4 in December.
United States Dollar
The dollar is making early gains this week, up 0.58% against a basket of other currencies (US dollar index) and up 1.37% against the British pound.
The gains came amid a sharp uptick in industrial activity in January. The consensus opinion among economists was that US economic activity would pick up in the New Year, but the speed of the recovery has caught some by surprise. The ISM manufacturing PMI jumped back above the key 50 level that denotes expansion in January, having been languishing well in contraction territory in December.
The removal of the uncertainty around the US China trade war has obviously made a big difference but the question moving forward will be how long that lasts given the coronavirus outbreak and negotiations over phase two of the trade deal.
