The Pound suffered losses versus most of the majors yesterday in reaction to a two-point drop in the UK’s manufacturing PMI.
Markit’s latest report showed that factory output slowed from an index of 56.3 to a three-month low of 54.3 in June due to a cooling of demand both at home and abroad.
It was the drop-off in domestic orders that had the biggest impact, as firms put investment decisions on hold due to increased business uncertainty. But markets were also disappointed by lacklustre growth in export orders, which suggested the Pound’s post-Brexit depreciation has not boosted competitiveness as much as some had hoped.
GBP/EUR Flat Despite 6-Year High Eurozone Factory Output PMI
The Pound to Euro exchange rate remained fairly flat yesterday despite the fact that European factory output outperformed the UK.
The Eurozone’s manufacturing index printed at a six-year high of 57.4 thanks to a series of 70+ month highs in Austria, Germany and the Netherlands. Sub-indexes for new orders, activity and job creation all performed well, with every single country reporting faster growth in June than in May.
But that wasn’t the only good news: unemployment in the Eurozone remained at an eight-year low of 9.3% and joblessness in the EU struck its lowest level since December 2008.
Although the Eurozone economy appears to be building up some momentum, the latest upbeat data stream did not translate into gains for the single currency versus Sterling.
GBP/USD Falls From 5-Week High as US Manufacturing Impresses
The Pound to US Dollar exchange rate depreciated by over half a cent yesterday, sliding through psychological support as sturdy US manufacturing data outshone a downbeat UK report.
The US ISM manufacturing index, which is considered the most influential measure of US factory output, smashed expectations of 55.3 with a three-year high score of 57.8 in June. The robust report featured rises in new orders, production and employment.
The ‘Greenback’ could mount further rallies if Wednesday’s Federal Reserve minutes report features hawkish rhetoric and Friday’s non-farm payrolls figure prints inline with market expectations of 173,000.
GBP/CAD Weakens -50 Pips on UK Manufacturing Miss
Sterling tumbled by around half a cent against the Canadian Dollar yesterday as underwhelming UK manufacturing data weighed on demand for the Pound.
Sterling’s losses were contained yesterday but we could see steeper declines on Wednesday if the UK’s highly influential service sector PMI also disappoints. Whereas manufacturing accounts for around 10% of British GDP, the tertiary services industries make up more than 70%.
Pound to Australian Dollar Exchange Rate Softens Ahead of British Construction PMI
The Pound drifted slightly lower versus the Australian Dollar yesterday following the morning’s downbeat UK manufacturing PMI.
British construction activity will be reported on this morning, but traders are unlikely to base any large GBP/AUD moves on the construction report because the sector only accounts for around 6% of UK economic growth.
GBP/NZD Flat Ahead of New Zealand Dairy Auction
The Pound to New Zealand Dollar exchange rate remained fairly flat yesterday, trading with a slight bearish bias following the three-month low UK factory output report. The main release to keep an eye on today is the dairy auction in New Zealand, which could drive sentiment towards the commodity-correlated ‘Kiwi’.
A rise in the value of the Antipodean nation’s most-lucrative export could boost the New Zealand Dollar, while a lower dairy payout result could weigh on the ‘Kiwi’.
Data Released
GBP Markit/CIPS UK Construction PMI (JUN)
GBP BOE Publishes FPC Record of Meeting Held on June 21
CAD Markit Canada Manufacturing PMI (JUN)
NZD Dairy Auction Avg. Winning Price MT (JUL 04)