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Can the pound bounce back from disappointing manufacturing PMI?

business-articlesCan the pound bounce back from disappointing manufacturing PMI?
  • Pound slides as UK manufacturing sector weakens
  • Underwhelming Eurozone manufacturing PMIs leave euro on back foot
  • Oil price rally lifts Canadian dollar
 
 
UK PMI contraction weighs on pound
 
The odds of a weaker second quarter UK gross domestic product picked up yesterday as June’s manufacturing PMI fell short of forecasts, easing to 48.
 
With the manufacturing sector falling further into a state of contraction, reflecting the disruptive impact of ongoing Brexit-based uncertainty, the mood towards the pound naturally soured.
 
Although the construction sector only accounts for a modest fraction of GDP a similarly weak showing from this morning’s construction PMI could add to the bearishness of the pound.
 
If the UK appears on course for a complete set of PMI readings below 50 in June GBP exchange rates could be driven lower across the board.
 
 
Eurozone producer price uptick could boost euro
 
As the Eurozone manufacturing sector remained in a state of decline in June the euro was under pressure at the start of the week.
 
However, this morning’s Eurozone producer price index data could offer EUR exchange rates a rallying point if price pressures show signs of picking up.
 
Evidence of increased inflationary pressure within the currency union may offer the euro a boost today, even though the odds of European Central Bank (ECB) monetary loosening are unlikely to change.
 
Another month of weak price pressures, though, could see the single currency remain on the back foot.
 
 
Canadian dollar vulnerable to manufacturing sector weakness
 
A fresh uptrend in oil prices helped to lift the Canadian dollar yesterday, with markets relieved by reports that the OPEC-led production-limiting agreement will see a six month extension.
 
CAD exchange rates could find additional support this afternoon if June’s manufacturing PMI shows an improvement on the month.
 
Even if the index remains within contraction territory, signs that the sector is recovering some of its lost momentum may encourage investors.
 
A further decline, on the other hand, would leave CAD exchange rates vulnerable to selling pressure.
 
 
Upcoming Data:
 
Tuesday, 2nd July 2019
09:30 GBP Construction PMI
10:00 EUR Eurozone Producer Price Index
14:30 CAD Manufacturing PMI
 
Philip McHugh

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)

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