Pound hits one-month high as Euro downturn deepens

Published: Friday, 2 November 2012 16:00 BST - Written by Ben Hughes

STORY LINK Pound hits one-month high as Euro downturn deepens

Sterling has risen to a one-month high against the Euro after the British currency was bolstered by better-than-expected UK construction activity data. Data last week showed the UK economy had climbed out of recession although there are doubts about the underlying strength of the economy. The good news added to investor optimism that the UK is on course to make a sustained economic recovery.

The Euro meanwhile has weakened against the majority of its peers due to the Eurozone posting disappointing manufacturing data. The sector shrank for a 15th month running in October as factory output waned and orders plummeted. The major concern now is that the rot from the Eurozone’s periphery has now infiltrated the core nations of France and Germany a fact that makes it a certainty that the majority of nations in the Eurozone will enter a deep recession in 2013.
"The situation in the core economies is worsening. Rather than the strength in the core dragging the periphery out of recession it appears more likely that the core will follow the periphery into recession," said Ben May at Capital Economics.

Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) fell to 45.4 in October from September's 46.1. The October figure was just up from an earlier reported flash reading of 45.3. The index has been below the 50 mark that divides growth from contraction since August 2011.
The manufacturers' output index sank to 45.0 from 45.9. Data out of Germany showed that its manufacturing sector shrank for a fifth month in a row.

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