ALERT: British Pound Rockets vs Euro and US Dollar on Blowout Manufacturing PMI, Weak GBP Boosting UK Economy
You are missing trading opportunities:
- Free trading apps
- Over 8,000 signals for copying
- Economic news for exploring financial markets
Registration
Log in
You agree to website policy and terms of use
If you do not have an account, please register
Pound Sterling surges on an incredibly strong reading from the UK manufacturing sector. Brexit? What Brexit?
GBP has surged higher on an exceptonally strong manufacturing PMI reading from IHS Markit and the CIPS.
The reading rose to a seasonally adjusted 53.3 last month from a reading of 48.2 in July.
This is a 10-month high and the month-on-month increase in the level of the headline PMI (5.0 points) was the joint-greatest in the near 25-year survey history.
Analysts had expected the index to rise to only 49.0 in August.
It appears that the surge has been driven by a weaker Sterling, confirming previous surveys that hinted that the sector had been kicked into life by the fall in the exchange rate.
The report notes:
"Improved sales volumes to markets such as the USA, Europe, China, South-East Asia, the MiddleEast and Norway led to a further increase in new export business during August. Moreover, the rate of growth accelerated to a 26-month high.
"The depreciation of the sterling currency was by far the main factor manufacturers cited as supporting the upswing in new export work."
We believe that this is the trigger that will trigger that breakout we wrote earlier this week was now due for a 'coiled' Sterling.
Some analysts are however warning against getting too excited about the data.
"Of course, we should treat August’s PMI reading with a pinch of salt, as it could well be an overreaction the other way," says Paul Hollingsworth at Capital Economics.
Hollingsworth does however note it was encouraging that the employment balance picked up above the 50.0 “no-change” level for the first time since December last year, and there were solid rises in both the overall new orders and export orders indices, suggesting that domestic demand has recovered somewhat while the lower pound has started to help exporters.
"Overall, then, the latest survey evidence supports our view that the economy is set for a period of slower growth, rather than a full-blown recession in the near term," says Collingsworth.
With regards to GBP's outlook, "sterling had this week given no ground away despite Teresa May beginning to follow through on the referendum result and today’s PMI reading will see a continuation of buying as the Pound gets an infusion of confidence", says Richard de Meo, Managing Director of Foenix Partners.
read more