Pound Sterling Jumps on Upbeat Manufacturing PMI Result
The Pound performed well yesterday as sentiment improved following a better-than-anticipated UK manufacturing PMI report.
Markit’s latest gauge of factory output jumped from a three-month low of 54.2 in June to 55.1 in July, beating forecasts of 54.5. It was foreign demand for UK goods that drove the figure higher, with exports rising at the fastest pace since the all-time high recorded in April 2010.
While the softer Pound was seen to boost competitiveness, much of the demand came from North America, the Asia-Pacific region and the Middle East, suggesting that, due to Brexit, manufacturers are now looking to markets further afield.
Jobs growth also impressed, coming in at one of the highest levels of the last three years, suggesting that the slowdown of the manufacturing sector in the second quarter may be reversed in the second half of the year.
Pound to Euro Exchange Rate Rallies 50 Pips Despite Solid Eurozone GDP
The surprisingly optimistic UK manufacturing PMI helped Sterling appreciate by around half a cent against the single currency yesterday.
Data out of the Eurozone also impressed, with economic growth in the second quarter printing at 0.6% – double the 0.3% expansion in Britain between April and June. The figure contributed to an annual growth rate of 2.1%, which, when combined with the trend of falling unemployment, could help persuade policymakers at the European Central Bank to start removing stimulus relatively soon.
Indeed, markets are betting on some form of ECB tightening, which has sent the Euro higher in recent weeks, but the currency bloc’s soft inflation rate (1.3%) remains a roadblock to such a move.
Pound to US Dollar Exchange Rate Hits New 10-Month High
Sterling strengthened against the US Dollar yesterday, striking a fresh 10-month high as UK manufacturing output beat the market consensus and White House worries persisted in weakening the ‘Greenback’.
President Donald Trump’s firing of media chief Anthony Scaramucci after fewer than 10 days in the job heightened concerns that chaos in the White House would make it even more difficult for Trump to enact the ambitious reforms that initially boosted the Dollar following his shock election victory. Hopes of historic tax reform and ‘massive’ infrastructure spending have all but faded in recent months, bringing the US Dollar down with them.
Data stateside showed that US factory growth decelerated from 57.8 to 56.3 in July, however, the figure barely weighed on the ‘Greenback’ because the ISM score still represented solid growth in the manufacturing sector.
Pound to Canadian Dollar Exchange Rate Rises to Fortnightly High
The Pound to Canadian Dollar exchange rate rallied by around half a cent yesterday, reaching a fortnightly high as upbeat British data bolstered demand for Sterling. In Canada factory output rose from 54.7 to 55.5 but demand for the ‘Loonie’ failed to ignite following the report.
Later today UK construction is expected to print at 54.0 for July, which is lower than June’s score of 54.0 but is unlikely to have a marked impact on the Sterling exchange rate because the construction industry only accounts for around 6% of the British economy.
Pound to Australian Dollar Exchange Rate Appreciates on Dovish RBA Comments
The Pound pushed ahead to a new two-week high versus the Australian Dollar yesterday as dovish comments from the Reserve Bank of Australia weighed on the ‘Aussie’.
The RBA left rates on hold at 1.50%, as was widely expected beforehand, and Governor Philip Lowe warned that ‘the higher [Australian Dollar] exchange rate was expected to contribute to subdued price pressures’. The remarks were seen to weaken the prospects of a near-term rate rise, however, some analysts still believe that the RBA will be moved to push rates higher later in the year.
Pound to New Zealand Dollar Exchange Rate Ticks Higher
Sterling ticked higher by around a cent against the New Zealand Dollar yesterday as robust manufacturing data boosted hopes that the British economy could accelerate in the second half of 2017.
The ‘Kiwi’ failed to gain much of a boost from the latest Fonterra global dairy auction, which saw milk powder prices rise 1.3%. Dairy is New Zealand’s most-lucrative export, but on this occasion the price rise was not enough to bolster demand for the ‘Kiwi’.
Data Released
GBP Markit/CIPS UK Construction PMI (JUL)