Forex Market: GBP/USD pares daily gains after downbeat UK construction PMI

The British pound pared daily gains against the US dollar, after data showed that activity in the UK construction sector expanded at a slower-than-expected pace last month.

GBP/USD hit a session high at 1.6664 at 08:19 GMT, after which the pair trimmed daily gains to trade little changed at 1.6644, adding 0.08% for the day. Support was likely to be received at April 1st low, 1.6619, while resistance was to be met at April 1st high, 1.6675.

The Chartered Institute of Purchasing and Supply (CIPS) reported that activity in the UK sector of construction declined in March, with the corresponding PMI coming in at 62.5 from 62.6 in the previous month and trailing expectations for an increase to 63.0. However, the index remained within reasonable range to Januarys reading of 64.6, the strongest level since January 2007. Readings above the key level of 50.0 are indicative of expansion in the sector.

Yesterday, pounds demand was pressured after data showed manufacturing activity in the UK slowed down in March, with the corresponding PMI falling to 55.3, the weakest since July, from a revised down reading of 56.2 in February. Analysts predicted the index will come in at 56.7 last month. A reading above the key level of 50.0 is indicative of expansion in the sector.

While the recovery seems to be gaining momentum, BoE Governor Mark Carney said that investments and exports need to accelerate in order to generate sustainable growth. Last year, the UK economy expanded at a 1.7% annualized rate, the strongest pace since 2010, but growth was mainly led by consumer spending.

Export orders declined sharply to 52.8 last month from 54.6 in February, the weakest since May, mainly due to decreasing demand in the Asia-Pacific region, data from the report showed today.

Meanwhile, employment in United States’ private sector probably increased by 190 000 during March, following another job gain of 139 000 in February. The report by Automatic Data Processing Inc. (ADP) is based on data, encompassing about 400 000 out of 500 000 business entities with over 24 million employees engaged in 19 major sectors of the economy in accordance with North American Industry Classification System (NAICS). It usually comes out two days before the official employment report by the Bureau of Labor Statistics (BLS), thus, providing clues over the tendency in nation’s non-farming sector. In case employment increases more than anticipated, this would have a bullish effect on the greenback. The report is expected at 13:15 GMT.

Factory orders in the United States rose 0.8% in February, a monthly survey will probably reveal at 15:00 GMT. In January compared to December orders fell 0.7%. This indicator reflects current industrial activity in the country and also provides clues over sector development in the future. The survey is based on 89 different industrial categories, which are organized in 473 sub-groups. A larger rate of increase would be supportive for the US dollar.