The British pound strengthened against the euro and the Swiss franc in the early European session on Tuesday, after data showed that U.K. construction sector expanded strongly in February as new orders logged the steepest rise since October 2014.

Data from Markit showed that the Chartered Institute of Procurement & Supply/Markit construction Purchasing Managers' Index rose to 60.1 in February from 59.1 in January. It was forecast to fall to 59. The score was above the neutral 50 threshold for the twenty-second straight month.

Meanwhile, the European stock market traded higher, as investor sentiment were bolstered by the better-than-expected German retail sales data.

Data from Destatis showed that Germany's retail sales rose at a faster pace in January from the previous month, taking the annual growth to the highest level in four-and-a-half years. Retail sales grew a seasonally adjusted 2.9 percent month-on-month in January, much faster than December's 0.6 percent increase. Economists had expected sales to rise at a weaker pace of 0.4 percent.

The U.K.'s FTSE 100 index is currently up 0.23 percent or 15.86 points at 6,956, France's CAC 40 index is up 0.22 percent or 10.66 points at 4,927 and Germany's DAX is up 0.21 percent or 23.77 points at 11,434.

In the European trading today, the pound rose to more than a 1-1/2-month high of 1.4778 against the Swiss franc, from an early low of 1.4690. If the pound extends its uptrend, it is likely to find resistance around the 1.56 area.

The pound advanced to 0.7269 against the euro, from an early low of 0.7286. On the upside, 0.71 is seen as the next resistance level for the pound.

Around 4:30 am ET, the pound edged up to 1.5374 against the U.S. dollar and 184.14 against the yen. The pound may test resistance around 1.57 against the greenback and 188.14 against the yen.

Looking ahead, Canada GDP for fourth quarter and industrial product price index for January are due to be released in the New York session.

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