- UK manufacturing PMI comes in at 55.9 in September and misses the consensus
- US dollar gains against its all peers within the G10 basket
- GBPUSD holds onto its downtrend on fading optimism in manufacturing
UK manufacturing PMI slid in September from 56.7 (revised down from 56.9) to 55.9 falling short of the consensus at 56.2. Even as the data still illustrates quite broad-based optimism in the manufacturing sector, a move down might call into question the latest improvement in the sector especially as two other PMIs remain sluggish. As a result, the GBPUSD has held onto its drop being the weakest currency in the G10 basket.
UK’s manufacturing PMI slips in September and could follow its two counterparts in construction and services. Source: Macrobond, XTB Research
Having looked at the IHS’s report it underlines that the continued solid progress of manufacturing and export growth is unlikely to offset concerns about a wider economic slowdown. On the flip side, cost inflationary pressures surged higher reflecting a mix of rising commodity prices, the ex-change rate and increased supply-chain pressures, the report says. By and large, overall optimism seems to be cooling down a bit, though increasing inflationary pressure could keep odds for a rate hike this year still alive.
Let us also recall that we got a disappointing revision of the second quarter GDP released on Friday which could be an effect of simmering concerns surrounding Brexit talks. Given a solid short-term uptrend in the US dollar one could assume that the GBPUSD may keep on declining for the time being.
The GBPUSD is losing ground against the US dollar as the latter is flexing its muscles at the beginning of the week. Source: xStation5
Technically, the pair has marked a notable decrease so far and it’s approaching a lower boundary of a descending channel. Once bears are able to break that level, space for subsequent drops might open up and 1.3160 could be another target to tick.