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European Session – Sterling down after UK Construction PMI, dollar broadly stronger

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pound-sterling-us-dollarSentiment for the US dollar was strong today, especially after supportive remarks from New York  Federal Reserve Chief William Dudley on Monday. Dudley played down the disinflationary threat of the fall in oil prices by saying they would likely boost income growth and help the US economy. Other encouraging remarks made were that a rate hike in mid-2015 was reasonable.

The dollar gained versus most major counterparts, particularly against the yen as it rose above the key 119.00yen  level to hit a fresh 7-year high of 119.27.

Sterling fell versus the dollar after a report showed UK construction slowed more in November than forecast. The Markit construction PMI fell to 59.4 from 61.4 in October, below the 61.0 that was expected. The pound fell to a low of 1.5646 from a European session high of 1.5729. Focus turns to UK Chancellor of the Exchequer George Osborne’s August Statement on Wednesday when he is expected to set out tax and spending plans.

The euro fell to a 1-week low against the dollar to touch 1.2408. Monday’s disappointing Eurozone PMI and today’s soft PPI did little to support the single currency. The main risk event will be Thursday’s ECB policy  meeting and Mario Draghi’s press conference.

The aussie fell back below the key 0.8500 level after failing to sustain gains made earlier today following news that the RBA left interest rates unchanged at 2.5%. Wednesday’s Australian GDP data now come into focus .

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