uploads///GBP Jan

British Pound Fell despite the Rise in Construction Activity

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Jan. 6 2016, Updated 7:09 a.m. ET

British pound fell

The British pound fell on January 5, 2016. It came close to an eight-month low against the US dollar even though the construction activity sector rebounded in December. The US Dollar Index measures the strength of the US dollar against a basket of currencies including the British pound. It rose due to lower-than-expected inflation data in the Eurozone, Chinese economic growth concerns, and the geopolitical crisis hovering in the Middle East. The pound gained by more than 0.5% against the euro due to large losses in the euro.

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Construction PMI rose

The construction PMI (purchasing managers’ index) in the United Kingdom rose to 57.8 in December. It exceeded the expectation of 56.0. It rebounded from 55.3 in November—a seven-month low. A reading above 50 indicates expansion. A reading below 50 points towards a contraction in the segment. The commercial building subsegment witnessed the highest growth pace. It rose at the fastest rate since October 2014.

Impact on the market

The iShares MSCI United Kingdom ETF (EWU) reacted negatively. It ended the day 0.25% lower on January 5, 2016. The First Trust United Kingdom AlphaDEX ETF (FKU) was on a positive bias. It rose by 0.15%.

Looking at British ADRs (American depositary receipts) and mining companies, BHP Billiton (BBL) rose slightly by 0.04%. Rio Tinto (RIO) rose by 0.84%. Amec Foster Wheeler (AMFW), a construction firm, rose by 0.31%.

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