Osborne Receives Boost from Construction Data, But Sterling Unmoved

George Osborne, © Pound Sterling Live 2015.

With less than 100 days to go until the 2015 General Election the UK’s Chancellor can rely on the economy to provide positive support.

The latest set of data, concerning the construction sector, comfortably beat expectations and confirmed the UK’s firm growth credentials remain intact.

Markit’s January Construction PMI read at 59.1, well ahead of consensus predictions for 57.6.

The data comes hot-on-the-heels of Monday’s Manufacturing PMI which was also better than predicted.

Dennis de Jong, managing director at UFX.com, says the figures will provide the incumbent government much needed support heading into the May elections:

“Today’s construction PMI figures beat even the most optimistic forecasts and they are a real cause for celebration for the UK government.

“It’s the reassurance George Osborne needed that the economy continues on an upward curve and provides a huge boost to the government with under 100 days to the general election.”

Construction PMI – the Details

Markit and the CIPS report a positive start to the year for the UK construction sector.

Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said:

“After the disappointing end to last year and the drop in the industry’s fortunes, the construction sector has had a perky start with good activity across all sectors.

“Though the month’s activity was well below the highs of the peak recovery months, the modest increase in growth may beat away any wider concerns around an unsustained improvement in the sector’s fortunes.”

But, Pound Sterling is Unmoved 

While the Conservatives may have something to gain from the latest construction figures, the same cannot be said for the British pound which was decidedly nonchalant when presented with the data.

The UK currency continues to ignore strong data releases which suggests to us drivers lie elsewhere. At present it would seem central bank policy is in the driving seat.

The Australian dollar was the latest currency to be devalued by its central bank which cut interest rates by 25 basis points to 2.25%:

“In their rate statement, the RBA once again stated that the Aussie is overvalued and a lower exchange rate will be required to help balance growth. Their decision to cut the rate is ‘expected to add further support to demand’ thereby aiding growth and keeping inflation within their target range,” says Raphael Sonabend, FX Analyst at CaxtonFX.

With regards to the pound euro exchange rate (GBP/EUR) we continue to see the shared currency stage a comeback from oversold levels.

The big 2015 sell-off came in the wake of the ECB’s introduction of sovereign quantitative easing.

But, it is worth noting that what the UK’s economic data tells us is that it is outperforming its Eurozone counterpart.

Such fundamental support will aid the British pound in the long run and patience is required for those hoping on better exchange rates.