The pound reaches its highest level against the Australian dollar since December 2009

The pound reaches a new high point against a number of currencies, reaching a level against the Australian dollar not seen since December 2009 and a high point against the South African Rand since October 2008.

The impetus for the latest move was better than expected UK construction data together with a rise in risk aversion in the international markets as it starts to price in the possibility of the US Federal Reserve ‘tapering’ its Quantitative Easing (QE) program as the US economy recovers from recession.

In the UK, Markit/CIPS reported an unexpected broad based upward move in the level of construction activity in November with new orders at a six-year high and the output and employment gauges rising at their sharpest rates since August 2007.

Activity in residential building was again the best performer although a sharp rise was recorded on commercial construction projects while civil engineering activity was described as having increased at a robust pace.

Commenting on the numbers, Dr. Howard Archer, Chief UK + Europe economist at IHS Global Insight remarked that “If the robust manufacturing and construction purchasing managers surveys for November are joined by a strong services one (out on Wednesday), it will look ever more possible that GDP growth in the fourth quarter could at least match the 0.8% quarter-on-quarter expansion seen in the third quarter. Much will depend on how well consumer spending performs in the fourth quarter, as there have been signs that consumers have taken a breather after spending at a robust pace in the third quarter.”

Meanwhile, Ben Broadbent a member of the nine man Monetary Policy Committee (MPC) of the Bank of England (BoE) commented in a speech in Bradford that the Bank will not raise UK interest rates until the economic recovery is well entrenched.

He also dismissed suggestions that the Bank of England´s framework of “forward guidance” had generated confusion.

“What is true is that we’ve no precise idea when the unemployment threshold will allow us to raise rates,” he explained.

Meanwhile, the Australian dollar continues to weaken this week despite better than expected economic data out of China and the news that the Reserve Bank of Australia (RBA) left interest rates unchanged for the fourth month in a row. Sentiment on the currency turned negative after Governor Stevens commented that in his opinion, the Australian dollar was still 'uncomfortably high'.

Today sees the turn of the Canadian central bank to announce its latest policy decision amidst lowering oil prices as the markets anticipate a return into the international markets for Iran in a boost to worldwide production at a time that demands remains static.