Pound Falls First Time in Three Days as U.K. Manufacturing SlowsAnooja Debnath and John Ainger
Sterling declines versus all but one of its G-10 peers
Data prove pound slide isn’t helping manufacturing: Pantheon
The pound dropped for the first time in three days against the dollar as U.K. manufacturing growth unexpectedly cooled for a third month in March.
IHS Markit’s factory Purchasing Managers Index declined to 54.2 from a revised 54.5 in February, above the key 50 level that divides expansion from contraction, but below economists’ expectations for an increase to 55. Sterling halted a three-day advance versus the euro and weakened against all but one of its Group-of-10 peers. This week’s data, ranging from services PMI to industrial output, may help provide clues on whether the fallout from Britain’s vote last year to leave the European Union is now beginning to show in the numbers.
- The data “showed some further moderation in confidence in the manufacturing sector,” says Lee Hardman, currency strategist at MUFG.
- “The U.K. economy is still doing relatively well, though there’s still fears we could see a sharper slowdown. But it’s not something we’re anticipating”
- A reading of 54 “has been consistent with stagnation,” according to Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics
- “The latest PMI survey provides more evidence to invalidate the widespread belief that U.K. manufacturing thrives when sterling depreciates,” he writes in a client note
- GBP/USD falls 0.3% to 1.2518, having earlier reached as low as of 1.2492. The pair advanced 0.6% percent last week, when it reached a seven-week high
- Support at 1.2434, March 31 low
- EUR/GBP climbs 0.4% to 0.8520, after an almost 2% fall last week
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- Yield on 10-year gilt drops 2bps to 1.12%
— With assistance by Vassilis Karamanis