After closing below its 100-day moving average for the first time in a year, not even better-than-forecast construction data was able to lift the pound from its four-week slide against the dollar.
The U.K. currency, which has dropped 1.9% against the dollar since July 4, was little changed versus the greenback today, even as Markit Economics said its Purchasing Managers’ Index for the industry was at 62.4 in July, beating the median estimate of 62 in a Bloomberg News survey of economists. The pound (CME:B6U14) is reversing a rally that pushed it to an almost six-year high against the dollar last month, and made it the best performing major currency during the past year.
“Investors have been buying into the pound aggressively but there has been some fatigue over the past few weeks,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “Although the construction PMI was good, there is a risk we see a consolidation in data at these elevated levels. Sterling could continue to grind lower.”
The pound was at $1.6841 as of 2:07 p.m. London time, after closing at $1.6821 on Aug. 1, below its 100-day moving average for the first time since Aug. 2, 2013. Sterling gained 0.2% to 79.70 pence per euro after weakening 0.9% in the five days through Aug. 1, the steepest depreciation since the period ended Feb. 21.
Sterling could drop toward the “mid-$1.67 level” in the next month, CIBC’s Stretch said.
Bank of England officials will keep the benchmark interest rate at a record-low 0.5% at the end of this month’s monetary policy decision on Aug. 7, according to all 47 economists surveyed by Bloomberg.
Sterling has dropped 0.3% in the past week against major counterparts tracked by Bloomberg Correlation-Weighted Indexes. In the past year, it has been the best performer of the 10 currencies, gaining 10%.
U.K. government bonds were little changed, with the benchmark 10-year gilt yield at 2.54%. The price of the 2.25% security due in September 2023 was 97.645.
Gilts returned 5.2% this year through Aug. 1, Bloomberg World Bond Indexes show. That compares with a 5.7% gain for German securities and 3.5% for Treasuries.