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Cable Held back by Construction PMI

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Cable Held back by Construction PMI

The British pound advanced against its US counterpart Tuesday, but trimmed its gains in the European session after construction PMI advanced at a slower rate than forecast.

The GBPUSD was trading at 1.6754, relatively unchanged from the previous close. The pair eased off an intraday high of 1.6780 following the release of UK construction PMI. Daily support is likely found at 1.6723 and resistance at 1.6770.

The pound fell sharply against the euro. The EURGBP pair was trading at 0.8139, advancing 0.25 percent. The pair is currently testing initial resistance. A break above the current level exposes 0.8156. On the downside initial support is likely found at 0.8108.

UK construction activity advanced sharply in May, although the rate of growth was the slowest since October 2013, Markit Group reported today. The headline PMI reading fell from 60.8 to 60. Economists forecast no change for the month of May.

House and commercial building moderated in May. Commercial building activity was the weakest in seven months, and residential building fell to a three-month low.

“UK construction activity has shown signs of moderation from the steep growth seen at the start of the year,” said Markit CEO David Noble. “[S]trong expansion in new business and improving economic conditions reflected particularly well on business optimism and outlook for the year ahead. Importantly, this was supported by a sharp increase in employment levels, an indication that this latest upturn will continue to expand.”

The report came a day after Markit Group said the UK manufacturing sector eased slightly in May. The market research firm will report on UK service activity on Wednesday.

Today’s data add further to the view Britain’s housing market is moderating after a strong year. On Monday the Bank of England said mortgage approvals declined for a third consecutive month in April, falling from 66,563 to 62,918. Stricter lending terms appear to have eased the pace of home buying, as the central bank looks to rein in the Help to Buy lending scheme.

Despite the apparent slowdown in housing activity, house prices continue to rise at a strong pace. UK house prices in May rose for the thirteenth consecutive month to reach an all-time high, Nationwide reported today.

House prices rose 0.7 percent in May, following a gain of 1.2 percent the prior month. Year-on-year, house prices surged 11.1 percent. The latest growth rate puts the average UK home now at £186,512.

In US data, factory orders advanced 0.7 percent in April, following an upwardly revised gain of 1.5 percent the prior month. Economists forecast an increase of 0.5 percent.

On Wednesday the ADP Institute will release its monthly estimate of US employment growth. ADP could show the US economy added 210,000 jobs in May.

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