Pound Sterling Loses Out as Boris Undermines PM Theresa May
The Pound put in a dismal performance yesterday, weakening across the board on fears of political uncertainty and economic fragility. New UK manufacturing data printed lower-than-anticipated yesterday morning, at 55.9 down from 56.7, while annualised second quarter GDP was revised down from 1.7% to 1.5% last Friday.
Sterling also felt the familiar force of negative Brexit news, with investors spooked by comments from foreign secretary Boris Johnson that appeared to undermine the leadership of Prime Minister Theresa May ahead of the Conservative party conference.
The PM is under growing pressure to sack Boris after he set out his own four ‘red lines’ that would not be crossed during Brexit negotiations.
The ‘red lines’ go beyond the carefully agreed cabinet positions outlined by the PM in her speech in Florence and many fear that Boris could be on the verge of contesting for leadership, which could open the door to another general election.
Sterling has softened due to the additional political uncertainty that the incident has caused.
Pound to Euro Exchange Rate Drops -50 Pips as Eurozone Manufacturing Hits 6-Year High
The Pound to Euro exchange rate dipped by around -50 pips yesterday as manufacturing activity slowed and Tory infighting dampened demand for Sterling.
The slowdown in the factory output purchasing managers index showed that the weaker Pound was making it more difficult for manufacturers to purchases materials, but that it was not having as much of a positive impact on export orders as expected.
Across the channel in the Eurozone, manufacturing output ramped up from 57.4 to 58.1, marking the fastest month of expansion since early 2011. Unsurprisingly, the six-year high score helped boost demand for the single currency
Pound to US Dollar Exchange Rate Slides -130 Pips to 3-Week Low
‘Cable’ deprecated by around -130 pips yesterday, striking a three-week low in the process, as demand for Sterling slumped on political and economic concerns.
The US Dollar, meanwhile, garnered support following news that the US manufacturing ISM struck a 13-year high of 60.8 in September, up from 58.8 in August.
The survey featured excellent scores for new orders, production and employment, suggesting that the Federal Reserve could be correct to pursue tighter policy later this year.
Pound to Canadian Dollar Exchange Rate Depreciates -100 Pips
Sterling’s losses stretched to GBP/CAD, with the Canadian Dollar appreciating by around 100 pips over the day. While British economic conditions appeared to deteriorate, in Canada sturdy manufacturing numbers breathed life into the ‘Loonie’.
Solid growth of 55.0, up from 54.6, was accompanied by encouraging signs that production and new orders are on the up in North America.
Pound to Australian Dollar Exchange Rate Plunges -150 Pips to Weekly Low
The Pound to Australian Dollar exchange rate shrunk by around -150 pips yesterday to strike a weekly low as UK sentiment was soured by political uncertainty and Brexit concerns.
Later today UK construction output is tipped to hold steady at 51.1, however, most analysts will probably be waiting for Wednesday’s British service sector report to make further moves. This is because construction accounts for less than 7% of UK GDP, while tertiary output makes up over 70%.
Pound to New Zealand Dollar Exchange Rate Suffers Ahead of Dairy Auction
The Pound’s poor day continued against the New Zealand Dollar, with GBP/NZD suffering a -120 pip daily decline, hitting its lowest level in a week.
The big data print to look out for today for this pair is the New Zealand dairy auction; any large rises in dairy prices could boost New Zealand GDP prospects and bolster the appeal of the ‘Kiwi’, while any declines could have the adverse effect.
Data Released Today
GBP Markit/CIPS UK Construction PMI (SEP)
GBP Record of the Financial Policy Committee’s September Meeting
NZD Dairy Auction Whole Milk Powder MT (OCT 03)