Sterling Moves Lower on Broadbent Comments; Ignores Construction PMI
Sterling is trading on the defensive despite stronger than expected UK construction PMI as trader reacted to remarks from BoE MPC member Broadbent, who said that the U.K. is not ready for a rate hike.
The BoE governor made his comments during an ITV interview Wednesday night. Sterling had popped slightly higher in the wake of the unexpected strength in the construction PMI, though this proved short-lived as Broadbent’s remarkets received broader market attention.
The U.K. Markit construction PMI rose to an eight-month high in September of 64.2, unexpectedly rising from 64.0 in August. The median forecast had been for a slight moderation to 63.5. The six-year high was 64.6, which was seen in January. Improvement in the construction sector was seen in civil engineering and commercial construction, while private house building continued at a robust level.
The construction sector only accounts for about 7% of GDP in the U.K., though there are strong multiplier effects from strong housing sector activity. Today’s report helps offset the dive in the manufacturing PMI in September, which extended the drop seen in August. Traders will be watching the European Central Bank and need to absorb the US payroll report scheduled to be released on Friday.
Technically, the pound broke through short term support near 1.6150, and is poised to test the September lows near 1.6050. Momentum is flat, with the MACD printing near the zero index level. The relative strength index (RSI) is moving lower with price action reflecting accelerating negative momentum, but printing a reading of 34, which is on the lower end of the neutral range and above the oversold trigger level of 30.
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