Britain’s construction industry showed signs of a recovery in August from a downturn that started just before the referendum, according to the latest Markit/CIPS UK Construction Purchasing Managers’ Index which rose to 49.2 from 45.9. Howe, the sub-50 print does still indicate contraction. The release will be scrutinised in relation to the incredibly strong manufacturing bounce observed on Thursday. Services PMI on Monday is the critical one to watch.

The sterling rose by around one per cent on the exchanges after Thursday’s strong number. EUR/GBP tested just below the 84p mark (1.1905) and GBP/USD marched back towards the $1.33 level. Britain’s factory index unexpectedly shot to 53.3 in August, a 10-month best, from a contractionary 48.3 in July. The five-point improvement stopped just short of a record for the nearly 25-year-old survey.

The data highlighted how the pound’s plunge to 31-year lows in the immediate aftermath of Brexit has been a boon for UK manufacturing, making exports more affordably priced. Both the sterling and the UK economy aren’t out of the woods but data indicating a limited Brexit blow should ease bearish sentiment and allow for momentary rallies.

USD

August has a strong history of disappointing against expectations, with the market consensus being anything above a “fairly low bar” 180,000 giving a green light to the Fed to hike.  Odds for a September hike fell off after Thursday’s poor PMI’s. The probability dropped back down to just 25 per cent but that spiked straight above 50 per cent on a strong release yesterday. USD under pressure against a lot of the majors at some quite important technical levels so a poor print could see the start of a long and hard time for the greenback.

EUR

The euro steadied with upside capped on the eve of the US’s monthly employment report. Also limiting upside for the euro was data on the eurozone’s manufacturing sector that was revised to a slightly slower pace of growth. The data dovetailed with other subdued reports on the 19-nation economy this week that showed a moderation in economic sentiment along with low inflation and high unemployment.

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