A -2.6% monthly GDP contraction weighed heavily on the pound as worries over the UK’s economic outlook picked up again.
The pound remains on weak form this morning. Gains of 0.9% for the GBP/EUR exchange rate to €1.1469 currently represents Sterling's best performance against its major peers. GBP/USD is flat at US$1.4065. GBP/AUD has fallen -0.2% to AU$1.8285, GBP/NZD has fallen -0.3% to NZ$1.9304, and GBP/CAD has fallen -0.1% to C$1.7993.
Read on to see why yesterday’s better-than-forecast PMI reading wasn’t enough to give pound Sterling a concrete boost…
What’s been happening?
Pound Sterling was largely on weak form yesterday, with markets unimpressed by the latest Markit manufacturing PMI reading for March.
The index did better than expected, clocking in at 55.1 instead of dropping to 54.7 in line with forecasts; although this technically means that the index rose on the month, this is only because February’s figure was retrospectively revised lower to 55.
Taken together with the January and February readings, the March figure rounds out the picture of manufacturing during the first quarter and reveals that the sector is growing at its slowest pace in a year.
GBP/EUR was able to record mild gains, however, with the Euro weakening in response to a poor data set.
German retail sales posted a surprise contraction of -0.7% month-on-month in February, compared to forecasts of a recovery out of negative territory with a score of 0.7%.
On top of this, the Italian and German manufacturing PMIs came in below forecasts.
Meanwhile, the GBP/USD exchange rate was able to hold opening levels, as recovering global market risk appetite hammered demand for the US dollar.
What’s coming up?
The Markit UK construction PMI for March is set for release shortly and is predicted to show a slight softening from 51.4 to 50.8.
Although the least influential of the Markit PMIs released for the UK, the construction index could still cause some pound movement, as another gloomy result to follow yesterday’s manufacturing disappointment could have traders selling the pound on fears that tomorrow’s vital services index is also going to print poorly.
Meanwhile, the GBP/EUR exchange rate could see strong losses if the forecasts for today’s Eurozone unemployment and consumer price index figures are correct, as both are expected to move in positive directions.
The US ISM nonmanufacturing composite index for March is predicted to weaken slightly this afternoon, although the score of 59 forecast would mean the measure will still remain impressively robust.
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)