By TraderVox.com
Tradervox.com (Dublin) – The UK sterling pound increased against the dollar after a two-day drop after a report from the UK showed that the construction sector in the country contracted at a slower pace than the market had predicted. The advance also came as UK gilts advanced after the borrowing cost fell in an auction of 3.5 billion pounds worth of ten-year UK bonds. The sterling remains down against the euro after dropping to a two-week low yesterday. A report expected to show UK services industry expanded last month will be released tomorrow.
Jeremy Stretch, who is the head of forex strategy in London at Canadian Imperial Bank of Commerce, said that the market is now looking at the pound-dollar pair, as they wait for the UK services data which is significant for the pound. Stretch predicted that the pound-dollar pair is likely to drop to 1.60 level this week rather than reach the resistance level at 1.62. A report released yesterday by the Markit Economics and Chartered Institute of Purchasing and Supply showed that the construction output gauge rose to 49.5 in September from August level of 49. The market was expecting a rise of 49.9. The services industry is expected to increase to 53 according to the market estimate.
The sterling performance against the dollar came despite the poor performance of the UK house prices in September. According to National Building Society report, the average cost of a home dropped by 0.4 percent from the August reading. The pound has advanced by 0.2 percent in the third quarter while the euro advanced by 0.1 percent. The dollar declined by 3.2 percent in the same period.
The UK construction data and the upcoming services sector report pushed the pound up by 0.3 percent against the dollar to trade at $1.6175 at the close of trading yesterday in London. The UK currency dropped by 0.3 percent against the euro to exchange at 80.11.
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