Sterling gains vs Euro on construction data

5th April 2011
Good morning. Sterling rose slightly against the Euro yesterday, helped by good UK construction data. Also Portugal has had it's credit rating downgraded, meaning it's likely they will face a bail out. This weakened the Euro and also pushed GBP/EUR higher. At 08:30am this morning rates are as follows:
Sterling gains on construction data

The construction sector grew only a touch slower in March than February's 8 month high, data showed yesterday, and a robust number from the services PMI survey could add weight to the view that the Bank of England will raise interest rates in the coming months.

That would give sterling a further boost after a month in which expectations for rates have ebbed and flowed. If you need to buy Euros however, be aware of the fact it's likely the ECB will raise EU interest rates this Thursday, which would give the Euro strength and make it more expensive to purchase.

After today's services PMI data for the UK, focus will turn to a BoE policy decision on Thursday.

The BoE is expected to leave interest rates on hold at 0.5 % this week, but borrowing costs are forecasted to rise in the coming months as the central bank seeks to counter inflation that is well above target. A hike may be delayed, however, if data points to a fragile economic recovery.

"Clearly as we get closer to the BoE policy meeting it's likely to be the policy debate that will reassert itself as the main driver," said Rabobank currency strategist Jane Foley.

Today's Data

Today’s UK data comes in the form of the Purchasing Managers Index (PMI). This is an inflationary measure and so can impact on interest rate movements. From the EU we have Retail Sales which is seen as a barometer of consumer confidence. Later in the day the US releases the minutes from its interest rate decision.

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