Pound rallies on unexpected UK manufacturing growth

Philip McHugh February 24th 2020 - 2 minute read

  • Surprise UK manufacturing growth boosts pound
  • German manufacturing data benefits euro
  • US dollar slides after services PMI miss

Positive UK PMIs shore up pound
February’s flash UK manufacturing PMI surprised investors by delivering a solid uptick from 50 to 51.9, avoiding the expected drop into contraction territory.
Along with the steady services PMI this suggests that the UK economy performed better this month, reducing the odds of a potential first quarter economic slowdown.
While the latest public sector net borrowing figure disappointed this was not enough to prevent the pound from making gains across the board on Friday.
However, with the UK and EU still facing difficult trade talks the potential for further GBP exchange rate strength may prove limited.
Euro losses possible on weaker German business sentiment
A better-than-expected German manufacturing PMI encouraged the euro to stage a rally ahead of the weekend.
Although the manufacturing sector still contracted in February the modest uptick in the PMI suggests that its decline could be bottoming out.
Worries over the outlook of the German economy could increase this morning, however, if the latest set of IFO business sentiment surveys fail to impress.
Softer manufacturing index may weigh on US dollar
The mood towards the US dollar soured on the back of a surprise decline in February’s US services PMI, which slumped from 53.4 to 49.4.
While the PMI is not given as much weight as the alternative ISM non-manufacturing index, this decline still weighed heavily on USD exchange rates.
Further losses could be in store for the US dollar this afternoon unless the Chicago Fed national activity index can deliver an improvement on the month.
As long as the index remains in negative territory worries over the outlook of the US economy are likely to persist, keeping USD exchange rates under a degree of pressure.
Upcoming Data:
Monday, 24th February 2020
09:00 EUR German IFO Business Climate Index
13:30 CAD Wholesale Trade Sales
13:30 USD Chicago Fed National Activity Index

Written by
Philip McHugh

Select a topic: