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Pound dips on UK manufacturing slump

currency-newsPound dips on UK manufacturing slump
After starting the week strongly, the pound spent Monday sliding against currencies like the US dollar and euro.

The GBP/EUR currency pair fell from a high of €1.1741 to a low of €1.1636, while GBP/USD snuck back below the key $1.25 level to trade in the region of $1.2442.

The pound’s losses against the commodity currencies were less significant, with GBP/AUD managing to return to trading at AU$1.6438 following the Reserve Bank of Australia’s (RBA) interest rate decision. GBP/CAD also held pretty steady as the resumption of oil production in Libya saw the price of Canada’s core commodity dip. 

Keep scrolling to find out whether the pound’s winning streak is over…

What’s been happening?

The main cause of the pound’s Monday downtrend was the UK manufacturing PMI from Markit.

The gauge had been forecast to come in at 55, but it actually fell to 54.2 in March. February’s figure was also negatively revised to 54.5.

Although the report contained a fair few positives, it also indicated that growth in the sector is expected to keep easing.

Markit Senior Economist Rob Dobson noted; ‘With growth losing further momentum in March, that weaker trend is likely to continue into the second quarter. The latest survey also clearly shows that high costs and weak wage growth are sapping the strength of consumers, with rates of expansion in output and new orders for these products slowing further.’

Meanwhile, the euro was supported by a decline in the Eurozone’s unemployment rate from 9.6% to 9.5%. The currency bloc’s manufacturing PMI also came in at its best level in six years.

Over in Australia, a disappointing Australian retail sales report was swiftly followed by the Reserve Bank of Australia’s (RBA) latest interest rate decision. While the central bank left interest rates on hold, the concerns it expressed about Australia’s housing market kept the ‘Aussie’ under pressure.

What’s coming up?

Today’s main UK news is the nation’s construction PMI for March. The index is expected to come in at 52.5, unchanged from February.

While the UK construction sector only accounts for around 6% of total economic growth, a below-forecast reading would increase concerns that tomorrow’s much more influential services PMI will also show a slide in output.

Subsequently, a reading of less than 52.5 could see the pound extend its recent losses against the euro and US dollar.

However, the GBP/EUR pairing could fight back in the afternoon if the Eurozone’s retail sales stats disappoint or if European Central Bank (ECB) President Mario Draghi indicates that monetary policy is unlikely to be adjusted for the foreseeable future.

The GBP/USD exchange rate could also experience further movement before the end of the day as the US publishes its factory orders and durable goods orders numbers for February. 
 
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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