UK manufacturing growth hits three month high as Pound advances on peers

Claire Hogarth04/Nov/2014Currency Updates

GBP

A solid start to the day for the Pound was almost completely wiped out by strong data coming out of the US during afternoon trading on Monday. The UK currency, however, managed to stabilise as the day progressed and finished UK trading just shy of 0.1% up against greenback, clawing back some of the 1.2% lost on the Dollar during October.

Manufacturing growth in the UK accelerated well above economists’expectations in October with Markit’s Manufacturing PMI increasing to 53.2, having dipped to 51.6 in September. This was the highest reading since July and came in above the 51.2 predicted. Despite the rise, export orders fell to the lowest level since January 2013, with economists earmarking a “near stagnation” in the Eurozone economy as the reason why this was the case.

More PMI data due out in the UK today, however, where at 9:30am the Chartered Institute of Purchasing & Supply will be announcing the construction index for October.

EUR

A slightly disappointed day for the single currency as the Euro declined against both the Pound and the Dollar on Monday after further signs of a weakening economy in the Eurozone. The currency fell by 0.15% versus Sterling and by 0.1% on the Dollar.

Markit’s manufacturing PMI for the Eurozone was revised 0.1 below the flash estimate at 50.6, although this was 0.3 up on September. This reading was significantly hindered by the ongoing struggles of the French, Italian and Greek economies, whose manufacturing sectors all contracted during October. The PMI for France, the Eurozone’s second largest economy, has now remained below the benchmark level of 50 since May, having fallen to just 48.5 in October.

A day of limited data for the Eurozone today, although a significant announcement at 10am GMT in Brussels as the European Commission releases its Economic Growth forecasts. However, continuingly weak growth data in the Eurozone bodes for a bleak outcome.

USD

Another strong day for the US currency as the Dollar rose against its major peers with the US Dollar Index increasing by 0.3%. The Index continues to show broad strength for the US economy having increased by over 1% since the beginning of last month.

Further good news for the US economy during trading yesterday as the manufacturing PMI released by the Institute of Supply Management rocketed to match its highest level in three and a half years of 59, well above the level predicted. The Greenback also continues to benefit from the Bank of Japan’s shock decision last week to add to its monetary stimulus. The Japanese central bank added an extra 20 trillion Yen to its yearly monetary stimulus on Friday, with the domestic currency suffering as a result, having now fallen by 4% against the Dollar since the announcement. It appears that the apparent divergence in monetary policy stance between the two countries has continued to play havoc in the foreign exchange markets this week.

A number of announcements within the US today begin at 1:30pm GMT with the release of the Trade Balance for September. After registering a record low last month, the US will be hoping for better factory orders data which will be released at 3pm in Boston.

Rest of the world

The Russian Ruble fell by 0.8% against the central banks Dollar-Euro basket, in spite of last week’s 150 basis point hike in rates by the Russian Central Bank. This was not the biggest decline of the day, however, as the Malaysian Ringgit retreated by 0.9% to reach a seven month low versus the strengthening Dollar, on the back of the Bank of Japan’s stimulus announcement last week.

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Written by Claire Hogarth

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