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Underwhelming UK PMIs fuel pound weakness

business-articlesUnderwhelming UK PMIs fuel pound weakness
  • UK construction decline weighs on pound
  • Euro stumbles on evidence of deepening German slowdown
  • Mixed US data fails to dent US dollar demand
Pound vulnerable to UK service sector slowdown
 
October’s UK construction PMI put renewed pressure on the pound yesterday as the sector showed another sharp monthly slowdown.
 
Although the index saw a modest improvement on the month, picking up from 43.3 to 44.2, it remained well below the 50 mark separating growth from contraction.
 
If the UK services PMI also remains in contraction territory this morning GBP exchange rates are likely to extend their losses further.
 
As the service sector remains the primary growth engine of the UK economy another month of weakness would bolster the odds of a softer third quarter gross domestic product reading.
 
 
Signs of Eurozone producer price uptick could boost euro
 
Confirmation that the German manufacturing sector remained in a state of decline in October limited the appeal of the euro at the start of the week.
 
A minor upward revision to the headline PMI failed to offer any encouragement to EUR exchange rates, with a sharp decline in job creation and factory orders pointing towards further weakness.
 
However, the mood towards the single currency could improve this morning on the back of September’s Eurozone producer price index data as long as the report shows the rebound in price pressures forecast by economists.
 
 
US dollar bolstered ahead of trade data
 
A sharper monthly decline in factory orders was not enough to weigh down the US dollar yesterday, with investors instead focusing on an improvement ISM New York index.
 
As manufacturing activity in October showed signs of recovery USD exchange rates enjoyed some upward momentum.
 
Further gains could be in store for the US dollar this afternoon if September’s trade deficit narrows as anticipated.
 
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