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Pound euro exchange rate: Sterling rises despite contraction of UK construction sector

Commenting on the data release, Tim Moore, the Economics Associate Director at IHS Markit said: “The UK construction sector moved into decline during February as Brexit anxiety intensified and clients opted to delay decision-making on building projects. Risk aversion in the commercial sub-category has exerted a downward influence on workloads throughout the year so far. This reflects softer business spending on fixed assets such as industrial units, offices and retail space.

“The fall in commercial work, therefore, hints at a further slide in domestic business investment during the first quarter, continuing the declines seen in 2018.

“[…]On a more positive note, input price inflation held close to January’s two-and-a-half year low. The slowdown in cost pressures from the peaks seen in the first half of 2018 provides a signal that the worst phase has passed for supplier price hikes related to Sterling depreciation.”

Meanwhile, the Eurozone’s Sentix Investor Confidence index for March rose to a higher-than-forecast -2.2 from the previous -3.7.

Sentix Managing Director, Manfred Huebner, said the change in direction could indicate that a recession can be avoided, pointing to positive figures from Asia, saying:

“This gives reason to hope that there will be no recession. [Asia] is in the best shape according to investor estimates. Should the signs of recovery intensify, they would have a positive impact on the Eurozone.”

Nevertheless, despite this ‘positive’ statistic the pound euro exchange rate continued to rise as investors focused on Brexit sentiment.

Looking ahead to tomorrow, the pound is likely to receive an upswing in support following the release of the UK Markit Services PMI. 

If the services sector reports a faster rate of growth as predicted, the pound will likely rise.

The pound could also be buoyed by February’s like-for-like retail sales if sales continue to rise as they did in January.

The Eurozone’s PMI composite is due for release tomorrow which may see the euro claw back some losses. 

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