Pound Falls as Construction Index Drops to Lowest Since 1997

The pound fell against the euro for a third day and dropped versus the dollar after an industry report showed the U.K.'s construction industry shrank in July at the fastest pace in 11 years.

The British currency declined to its lowest level versus the euro in almost a week after an index based on a survey of purchasing managers at building companies dropped to its lowest since the series began in April 1997.

The British currency weakened to 79.18 pence per euro as of 9:51 a.m. in London, from 78.79 pence at the end of last week. It slid to $1.9691 from $1.9750.

The Chartered Institute of Purchasing and Supply construction purchasing managers' index declined to 36.7 from 38.8 in June. Economists had forecast a drop to 37.5, according to the median of nine estimates in a Bloomberg News Survey.

Traders scaled back bets the Bank of England will lift its benchmark interest rate, with the implied yield on the December short-sterling futures contract dropping 4 basis points to 5.75 percent.

Bank of England policy makers left the key interest rate unchanged at 5 percent at the July 10 meeting after lowering it three times since November in a bid to stave off a recession in the face of accelerating inflation. It's scheduled to make its next interest rate decision on August 7.

Pound Falls as Construction Index Drops to Lowest Since 1997

TradingEconomics.com, Bloomberg
8/4/2008 6:30:15 AM