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Pound Gains Strength on Positive PMI Numbers

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Oct. 5 2015, Published 12:53 p.m. ET

Construction purchasing managers’ index at a seven-month high

On October 2, 2015, Markit published the UK Construction PMI (purchasing managers’ index), which rose to 59.9 for the month of September, well above market expectations. Housebuilding was the major driver of the positive construction numbers. Residential building posted the largest expansion, a twelve-month high, while commercial buildings and civil engineering also rose sharply to a seven-month high. Construction companies were positive about the future, with 52% expecting an upturn in business activity. Job creation was also strong in the construction sector with hiring accelerating to a three-month high.

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Pound gains strength

The pound gained strength against the US dollar on October 2, 2015. The uptick came with the announcement of strong construction PMI numbers. Also, during the day there was a large spike as US non farm payroll came out on a disappointing note, pushing the pound to US dollar exchange rate to a high of 1.5238. The pound lost some of the gains towards the end of the day, but still closed 0.35% higher.

Impact on the market

The iShares MSCI United Kingdom ETF (EWU) reacted positively to the data release and ended at 2.67% higher on October 2, 2015. The First Trust United Kingdom AlphaDEX ETF (FKU) followed a similar trend, rising by 1.89%.

British ADRs (American depositary receipts) also reacted positively to the strong economic indicators, with Unilever PLC (UL) and Carnival PLC ADS (CUK) rising by 1.91% and 0.85%, respectively. BHP Billiton (BBL) also traded positively, rising 3.17%.

 

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