UK construction industry enjoys surprise expansion in February

Enrique Díaz-Álvarez04/Mar/2015Currency Updates


A very quiet day for Sterling saw the UK currency trade within a narrow band of its major counterparts. The Pound ended London trading 0.1% up on the US Dollar.

The construction industry in the UK grew strongly once again in February to its best position since September last year. Markit’s Purchasing Managers index leaped above expectation to 60.1, up on January’s 59.1 reading. The housing, commercial and civil engineering sectors all showed signs of acceleration in growth last month. While construction accounts for just 7% of output in the UK, the uptick in growth will be welcome news to George Osborne and the Conservative party ahead of May’s General Election.

More data from Markit Economics today in Britain with the release of service sector growth for February at 9.30am, the only major announcement in an otherwise quiet day.


The Euro fell against Greenback during morning trading, although clawed back some ground during the afternoon session to end the day 0.1% higher on the Dollar. There was little movement in GBP/EUR yesterday, with the single currency flat against the Pound.

Retail sales in Germany surprised on the upside yesterday boosted by an increase in internet and food sales. The annualised measure climbed by half a percent to 5.3%, having risen well above forecast in January by 2.9% month on month. While this is a volatile number prone to revision, it shows ongoing improved sentiment towards the German economy following strong consumer confidence and economic growth released last week. However, the Eurozone’s producer price index, a measure of the prices received by domestic producers, disappointed, falling by 0.9% MoM in January and by 3.4% on an annualised basis. This was the largest yearly decline since way back in December 2009 and the height of the financial crisis.

A string of second-tier data releases in the Eurozone throughout this morning. Services sector growth in Germany, France and Italy likely to lead to moderate Euro volatility.


Yesterday was an unusually subdued day in the world’s largest economy with a lack of significant announcements leading to little movement in the US Dollar. The Greenback finished the day 0.1% down against its major peers.

The Johnson Redbook sales index, which represents seasonally adjusted sales of large US merchandise retailers, increased slightly in February. The index edged up by 0.8% last month from January and by 2.7% on an annualised basis. A partial recovery from record snowstorms in the Northeast helped provide a modest boost. In other news, New York business activity expanded last month with the ISM index rebounding from a multi-year low of 44.1 in January to 63.1 in February. Elsewhere, the IBD economic optimism index rose to 49.1 from a three month low of 47.5 recorded in the first month of the year.

A busier day in the US today should see a greater level of volatility in the Dollar. Market focus will be on the ISM’s measure of non-manufacturing output at 3pm GMT. Additional volatility to be expected throughout trading with Markit’s services PMI and ADP employment change also due for release in the afternoon.

Rest of the world

The Reserve Bank of Australia surprised markets by not cutting its interest rate as had been expected, instead opting to keep the benchmark rate at 2.25%. This has done nothing to dampen expectations of a further cut in the coming meetings with weak employment, low inflation, and poor company profit figures mounting huge pressure on the central bank.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.