Friday 17 March 2017 2:16 pm

Euro falls against the US dollar after construction fall hints at weakness in recovery

The euro fell sharply today against the US dollar as new data cast doubt on the narrative of an uptick in economic activity in the European Union.

The euro fell to lows of $1.0728 against the dollar after having reached highs of $1.078 earlier this morning.

Construction in the Eurozone dipped markedly in January, falling by 2.3 per cent compared with the month before, according to the European Commission. The year-on-year decline was even greater, at 6.2 per cent.

Output in the construction sector had already contracted by 0.6 per cent in December.

Weaker construction output could weigh on growth prospects at a time the European Central Bank (ECB) has said its confidence in the economic conditions is growing.

The two-month dip in construction output contradicts survey evidence, with IHS Markit’s purchasing managers’ index indicating expansion in the sector over the past four months.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “This setback makes it difficult for us to come up with an upbeat forecast for the first quarter as a whole.”

He added: “Survey data suggest that construction in the Eurozone is turning up, though, so we’re confident that the hit in January is a temporary blip.”

Meanwhile the currency bloc’s recorded a trade deficit for the first time since January 2014, as the Eurozone imported €0.6bn (£0.5bn) more than it exported, according to the European Commission.

Imports rose by 17 per cent year-on-year to reach €164.5bn (£121.6bn), with a massive increase in chemicals driving up the volume of manufactured goods.

The Eurozone’s trade balance has been politicised in recent months, with US President Donald Trump’s administration saying Germany, the largest European economy, was exploiting the US with an undervalued euro which boosted their exports.