The Pound’s (GBP) attempts to rally against the Danish Krone (DKK) were short lived this morning as the UK’s Construction PMI fell further than expected last month.
Pound Retreats Following Downbeat Construction PMI
The Pound was weakened today following the release of the UK’s latest construction PMI, which dropped below expectations.
According to data compiled by London based analytics company IHS Markit, growth in the UK’s construction sector slowed from 52.5 to 52.2 in March, falling further than the 0.1% decline that had been initially forecast by economists.
The drop was largely attributed to businesses facing increased costs as the falling value of the Pound drove up the price of materials.
While the report did suggest that the industry was shaking off some of its Brexit anxiety, analysts were not quite so convinced as they remain concerned that future growth may suffer.
Howard Archer, Chief European & UK Economist of IHS Markit, said;
‘Following on from a third successive modestly softer manufacturing purchasing managers survey for March, the lacklustre construction PMI maintains suspicion the UK economy is beginning to falter. Signs of slowing UK growth is particularly evident in consumer spending.’
The poor construction report also follows the release of the UK’s Manufacturing PMI on Monday which suggested that domestic consumption is falling as rising inflation and weak wage growth pressures British households.
Danish Krone Slowed by French Election Concerns
The Danish Krone’s position pegged to the Euro caused its advance to be slowed today as markets turned their focus to the upcoming presidential elections in France.
With the 11 candidates vying for the French presidency set to go head to head in the second televised debate later this evening, concerns over populist and Eurosceptic candidate Marine Le Pen have bubbled up once again.
While Le Pen is still set to lose in the second round to independent candidate Emmanuel Macron according to polls, traders believe Le Pen could regain some ground during the debates as her other rivals set their sights on Macron.
Markets also fear that Macron’s supporters are not as committed as Le Pen’s, with the majority of them driven by dissatisfaction with the other candidates and that a record low turnout could prove to be advantageous for Le Pen’s National Front Party.
GBP DKK Forecast: UK Services Data Ahead
The GBP DKK exchange rate may rally on Wednesday with the release of the UK’s Services data, with the final March PMI reading expected to show that the private sector grew from 53.3 to 53.5.
However should activity in the services industry mirror the drop seen in the manufacturing and construction PMI it is highly likely that Sterling will tumble as the sector’s health remains a major economic indicator for investors.
Meanwhile the Danish Krone may strengthen at the end of the week if domestic industrial production rises as expected in February.