The Pound declined across the board yesterday as investors reacted to a slightly softer-than-anticipated UK Manufacturing PMI print for December. Compared to the 3-year high of 58.1 in November, the factory output Purchasing Managers Index came in at 57.3, confounding forecasts for a score of 58.2.
The disappointing reading gave traders some impetus to cash in on the Pound’s elevated exchange rate against most of its major currency peers. Prior to the PMI reading Sterling was riding high at a 2-year high against the US Dollar, a 4-year high against both the Australian and Canadian Dollars and was trading close to yearly highs against both the Euro and the New Zealand Dollar.
By the end of yesterday’s session Sterling had depreciated by around -0.2 cents against the Euro, -1.4 cents against the US Dollar, -1.7 cents against the New Zealand Dollar and -2.0 cents against both the Australian and Canadian Dollars.
Despite the decidedly downbeat reaction among currency traders, December’s Manufacturing PMI actually had a lot to be cheerful about. It marked the ninth consecutive month of expansion for the sector, it marked the strongest monthly gain out of all the developed economies and it saw Production and New Orders remain close to 22-year highs.
Additionally, Job Creation held steady at a rate just below November’s 2.5-year high, boding well for the UK labour market, which of course is of great significance to the Pound because of the Bank of England’s forward guidance policy.
Global Manufacturing
JP Morgan released a note yesterday estimating that the global Manufacturing Industry increased at its fastest rate since February 2011 during the final month of 2013. With demand and inventory dynamics pointing towards further growth in the New Year, JP Morgan predicted that factory output could continue to drive the global economy forwards in the coming months.
Eurozone Manufacturing struck a 31-month high of 52.7, driven primarily by a 32-month high of 54.3 in Germany and an encouraging print of 57.0 in the Netherlands. The only real negative to come from the report was a disastrous 47.0 score for the 18-nation bloc’s second largest economy France. The disappointing French score is especially worrying when you consider that even Greece managed to post near-equilibrium with a reading of 49.6.
Across the pond in the United States it was reported that the Manufacturing PMI came in at an 11-month high of 55.0, whilst the more widely-followed ISM figure also exceeded analysts’ expectations with a sanguine score of 57.0.
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