Manufacturing PMI – Better in Europe, Worse in UK

EURGBP, H4            

Final Eurozone manufacturing PMI was unexpectedly revised higher, slightly, to a reading of 52.0 versus the preliminary estimate of 51.9. This is down form 52.8 in June, indicating an abatement in the pace of expansion in the sector. Weakness in France and in peripheral economies weighed on the pan-region reading, offsetting a rise in activity in Germany and some of the smaller northern European member nations. The lop-sidedness was strong, with France showing a sub-50.0 contractionary reading of 48.6, although this was a four-month high and a rise from 48.3 in June. Greece’s reading was 48.6, while at the other end of the spectrum; Germany’s was 53.8, which is the lowest reading in two months.

Meanwhile, across the English Channel in post Brexit UK; UK final manufacturing PMI for July unexpectedly revised lower, to 48.2 from the preliminary estimate for 49.1. This follows 52.1 in June, with the deterioration blamed squarely on disrupting uncertainties thrown up the June-23 to exit the EU. The preliminary estimate comprised 80% of the survey’s responses, and the big revision suggests that the first month after the Brexit vote was even worse than previously thought. The final composite PMI will be released on Wednesday alongside the final services PMI reading. The flash composite PMI dove to 47.7, consistent with Q3 GDP of -0.4%. Sterling took a clobber on the data today. BoE MPC member Weale, who is by reputation a relative hawk on the policy-setting Committee, suggested last week that the dismal preliminary PMI data had convinced him that the policy loosening would be justified.

EURGBP rallied to 0.8470 on the news release and the GBPUSD was as low as 1.3171, before recovering to 1.3180.

We remain in SHORT positions in Cable (from 1.3450 July 14th) and GBPJPY (from 138.77 July 27th).


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Stuart Cowell

Market Analyst


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