Sterling drifts higher ahead of central bank meeting

Construction shrank for sixth month in a row in October, reflecting wider slowdown in growth.

    Economists are not expecting the central bank's next meeting to be earth-shattering [Reuters]
    Economists are not expecting the central bank's next meeting to be earth-shattering [Reuters]

    The British pound edged higher on Tuesday, tracking some lingering overnight weakness in the greenback though election-related uncertainty capped gains.

    Weak PMI data on Monday also muted any expectations of policy changes from the Bank of England at a policy meeting this week.

    The PMI data showed that construction shrank for the sixth month in a row in October - in line with expectations and reflecting a slowdown in growth due to political uncertainty before United Kingdom Prime Minister Boris Johnson's now-defunct October 31 Brexit deadline.

    BNP Paribas economists, for one, expect the central bank's November policy meeting to be a neutral event for the pound.

    "We maintain a structurally bullish stance on the currency, although with uncertainty surrounding the outcome of the general election, we are patient," they said in a note.

    Against the dollar, the pound drifted 0.2 percent higher at $1.29 but remained well within recent trading ranges.

    Versus the euro, the pound was steady at 86.31 pence ($1.11).

    Leveraged funds that bet on the direction of sterling reduced their short positions on the pound in the week to October 29 to $2.6bn, a six-month low, according to CFTC data on Refinitiv.

    With just over five weeks until Britain heads to the polls on December 12, the ruling Conservative party is leading in the polls and the risk of a "no-deal" Brexit is considered to have been reduced.

    SOURCE: Reuters news agency