UK manufacturing contraction hits pound
[vc_row][vc_column][vc_column_text]An unexpected contraction in the UK manufacturing PMI put fresh pressure on the pound with signs increasingly pointing towards the economy losing momentum in the second quarter.
Worries over the outlook of the Eurozone economy also limited the appeal of the euro, with the Italian government voicing its dissatisfaction with EU budget rules once again.
While the Trump administration announced a fresh tariff on Mexican imports this only gave the US dollar a limited boost, given increasing concerns over the resilience of the domestic economy.
Both the Australian and New Zealand dollars remained on a weaker footing, meanwhile, as markets brace for the prospect of fresh interest rate cuts.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]As the UK manufacturing PMI saw a surprise fall into contraction the mood towards the pound continued to sour as Brexit-based uncertainty continues to weigh on the economic outlook.
GBP exchange rates remained on the back foot after the manufacturing PMI slumped from 53.1 to just 49.4, reflecting a sharp slowdown within the sector.
With the stockpiling boost in the run up to the original Brexit deadline having quickly faded investors are concerned that the manufacturing sector could face a recession.
Coupled with the sharp -44% decline in UK car production seen last week this raised fresh anxiety over the economy’s resilience in the face of the persistent atmosphere of political uncertainty.
The mood towards the pound could see a further deterioration if Wednesday’s services PMI proves similarly disappointing.
As the service sector still accounts for more than three quarters of UK economic activity any contraction here would weigh heavily on GBP exchange rates.
Unless the services PMI shows an uptick in growth on the month the pound looks set to remain under pressure in the days ahead, especially if political anxiety continues to dominate the headlines.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]
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* Information courtesy of Currencies Direct, Philip McHugh
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)
The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information. This article was written by Currencies Direct.
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