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Sterling advanced against the US dollar this morning, despite heightened levels of risk aversion in equity markets, as the Purchasing Managers' Index (PMI) for the domestic construction sector rose to a reading of 47 in July from 44.5 the month before.
The data, which is only three points away from the 50-threshold that separates contractions from expansions, provides further evidence of a recovery in Britain's economy.
The release of interim results yesterday showing stronger profitability at Barclays, HSBC and Standard Chartered are also supporting sterling. It is also worth noting that the BoE monetary policy meeting will be held on Thursday and, in my view, policy makers won't increase their asset purchase above the £150 billion limit given recent upbeat developments.
