British Pound Falls as Construction Activity Declines in December

The British pound fell against most of its major peers on Wednesday following a fresh release that showed a drop in activity within the construction sector in the last month of 2017. The British currency further weakened against the US dollar as traders anticipated the minutes of the last Federal Open Market Committee’s meeting.

The Chartered Institute of Purchasing and Supply, which releases a monthly report on construction activity in the United Kingdom, said today that the sector saw a drop in December. The construction purchasing managers’ index had a reading of 52.2 last month from 53.1 in November, while analysts had expected a reading of 52.8. Reading above 50 indicate that the sector grew.

The report added that the number of new construction projects showed resilience to the drop as new orders increased the most since May. Purchasing activity also improved last month at the highest pace in two years. However, persisting cost pressures from higher prices for building materials weighed on the index.

The main contributor to construction growth was home building activity, while commercial construction had a drop and civil engineering remained stable after three months of declines. A subindex that tracks short term outlook revealed a drop in business expectations for the next 12 months.

Meanwhile, the US dollar gained strength from a hike in manufacturing activity in the United States, according to a report from the Institute for Supply Management. The report said that the manufacturing purchasing managers’ index rose to 59.7 in December from 58.2 in November. A reading of 58.1 was forecasted ahead of the report.

Traders now await the release of the minutes of the Federal Open Market Committee’s latest meeting later today, which might contain some hints on future monetary policy.

GBP/USD traded at 1.3511 as of 16:20 GMT on Wednesday after touching 1.3504 at 15:20 GMT, the pair’s lowest level since December 29. GBP/USD began trading today at 1.3595.

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