Sterling moves up again on divergent global manufacturing data

Claire Hogarth02/Jul/2014Currency Updates

Sterling pushes further after good data from the UK, while data from the rest of the world disappoints. Equity markets rally on the back of positive Chinese manufacturing data.

GBP

The pound moved further upwards across the board, around 0.3%, on a data disparity between the UK and the rest of the world. Markit’s closely watched manufacturing index expanded at the fastest pace in seven months to 57.5 in June, half a basis point up on May, while new orders marched onwards to 61.1. Encouragingly, export orders are up for the 15th month in a row, a good indication of UK business increasing success abroad.

The continuing plethora of good data will only increase expectation of an early rise in interest rates, indeed this was reflected in the futures market as Sterling based 9 month futures rose to 1.12%.

While Carney is unlikely to take any action this month it will of course be interesting to hear his latest thoughts. Low level data from the UK today including construction PMI and house prices.

EUR

While the UK’s factories and workshops continue to expand, manufacturing in the EU contracts once again. Markit PMI for June fell to 51.8 from 52.2 in May, the lowest level this year. As was the case with inflation yesterday, the worst performers were France and Germany, the bloc’s two biggest performers, while the likes of Spain and other periphery nations experienced a mild expansion. Unemployment remained at 11.6% this month, although the number of people out of work fell by 20,000.

While Draghi is unlikely to throw the market any curveballs tomorrow, pressure is mounting on the ECB chairman to introduce another round of easing measures again next month.Today also sees Italian PM Matteo Renzi lay out his plans for Italian long term growth to the European Parliament.

Eurozone GDP for Q1 yoy out today at 10.00 BST.

USD

Manufacturing indices from Markit and ISM fell 0.2 and 0.1 respectively in June, while construction spending fell to just 0.1%, the lowest for 4 months. The greenback fell against the pound but equally poor EU data stayed any EUR/USD movement.

As is often the way, while the dollar toils capital markets flourish. As the prospect of continuously low interest rates hampers the currency, the attractive borrowing rates push investors into equities, as seen by another record close from the S&P yesterday.

The dollar did see some gains against the Aussie dollar, after the country’s trade deficit exploded to A$1.9bn on the back of declining natural resource exports.

Today we have employment figures, factory orders and a speech from the venerable Janet Yellen.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.