US manufacturing growth slows for fifth straight month in March

Enrique Díaz-Álvarez02/Apr/2015Currency Updates


The Pound recovered ground on the Dollar having falling in morning trading to finish the London session 0.1% down.

The UK economy looks set for another healthy expansion in the first quarter after manufacturing growth surged above forecasts for the third consecutive month. Markit’s flash PMI jumped to its highest since July last year, climbing from 54.1 to 54.4 in March. The main contributor was new orders, which soared from an index of 56.4 to 57.9 after overseas demand grew, having contracted slightly in February. This will no doubt alleviate some of the concerns surrounding a strong Pound, which last month touched a seven year high against the Euro.

Wednesday also saw the release of a report from ONS which showed productivity in the UK still remains slightly below its pre-recession levels, marking an unprecedented absence of growth since World War II. UK labour productivity fell by 0.2% in the final three months of last year, little changed on 2013 levels.

We’ll see more data from Markit today, with the flash construction PMI at 9:30am likely to cause moderate volatility.


Despite encouraging growth data in the Eurozone, the single currency traded within a narrow band with Greenback, finishing unchanged on yesterday.

A weaker Euro and launch of the quantitative easing program by the ECB appears to be filtering its way through to producers after manufacturing growth rose for the third consecutive month in the Eurozone. Growth in Germany, Italy and France all surprised on the upside, adding further signs that the Eurozone economy is reviving after last year’s slowdown. The overall PMI climbed from 51.0 to 52.2 following impressive German growth, which soared to a nine month high of 52.8 from a previous 51.1.

A lack of data out in Europe this morning means all eyes will be on the ECB at the release of its monetary policy meeting accounts at 2:30pm London time.


Wednesday was a mostly quiet day for the Dollar. The US Dollar index ended the session 0.1% lower.

Manufacturing growth in the US slowed for the fifth consecutive month in March, adding weight to the moderate slowdown we’ve seen in the US economy so far this year. The Institute of Supply Management’s manufacturing index declined to its lowest since January last year, falling from 52.9 to 51.5. While disappointing, this is an unsurprising reading, given the strong US Dollar and poor winter weather has led to a decrease in demand. Applications for US home mortgages rose for the second consecutive week last week, climbing by 4.6%. The ADP measure of employment showed the number of people in work in the US climbed by 189,000 in March. Disappointingly, this was the first time since May that the indicator had dipped below 200,000. Elsewhere, construction spending growth unexpectedly remained negative for the second month, declining by 0.1% in February.

Federal Reserve member Dennis Lockhart echoed commentary from many of his peers of late by stating the US remains on track for an interest rate hike in the June to September period. The Atlanta Federal Reserve bank president expects weaker first quarter growth to pave way for a stronger second quarter, warning markets to pay particular attention to employment indicators in the coming weeks.

A number of second-tier data releases in the US today will be overshadowed by crucial nonfarm payroll data on Friday. With traders away for Good Friday in much of the world, a drain in liquidity from markets could add to the usual post-payrolls volatility.

Rest of the world

President of Brazil Dilma Rousseff yesterday ruled out intervention in the FX market, saying the Real will be allowed to fluctuate freely despite the recent downward pressure on the currency.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.