by Peter Lavelle
Sterling has continued its week-long side versus the euro today, dropping -0.33% to just 1.32, its weakest since January 21st, or a fortnight.
The pound as weakened, in spite of the fact that UK construction activity unexpectedly accelerated in January, while producer prices in the Eurozone fell further.
Sterling drops, in spite of UK construction pick-up
The pound to euro exchange rate has dropped to 1.32 today, although Britain's construction sector rose to 59.1 last month, according to Markit's closely-watched measure of economic activity. This 59.1 was above all forecasts, and signals that UK construction may be picking up in early 2015. According to Markit's measure, any number above 50.0 points to expansion, and the higher the better.
In particular, UK construction firms may be buoyed by the fact that new orders rose at the fastest pace in three months in January, while industry optimism also rose for the first time since October. Tim Moore, senior economist at Markit, noted that "In short, the peak speed of the construction recovery seems to be over, but reports of its death have been greatly exaggerated."
However, sterling weakened versus the euro today, in spite of this good news. This may be because construction accounts for just 6% of UK economic activity, and so is unlikely to widely boost the overall economy.
Euro rises, in spite of falling producer prices
Moreover, sterling also lost out versus the euro today, in spite of the fact that industrial producer prices fell -1.0% in the Eurozone in December. This signals that industrial firms on the continent paid less to produce their goods over Christmas 2014, and so will contribute to deflation in the currency bloc. Given this, it's also surprising that sterling has lost out versus the euro.
