Pound strengthens on positive news from Europe

Indications Europe is making progress in dealing with its debt crisis has given a boost to market sentiment and saw the pound rise to its highest level against the US dollar in nearly a month.

However, there are signs that the UK economy continues to struggle after construction data released for November indicated the sector remains weak. During afternoon trading in Europe the pound hit 1.6131 against the greenback, a gain of 0.17 per cent.

Greece has announced it intends to offer private investors a scheme that will see Athens buy back some of its debt. Reducing debt is vital if the country wants to receive a €44 billion bailout package agreed by finance ministers and the International Monetary Fund. German leader Angela Merkel reportedly indicated at the weekend that Greek debt could be wiped if it meant the country recovering more quickly.

The Chartered Institute of Purchasing and Supply said the construction purchasing managers’ index in the UK fell from 50.9 in October to 49.3 in November, the lowest it has been for three months. Economists had been predicting a smaller fall to 50.5 in November. The euro is currently 0.14 per cent up against the pound at 0.8123.

Eurozone banking supervision is currently being discussed by finance ministers in Brussels.