The UK pound spiked above 1.2900 as the Manufacturing PMI beat expectations and rose to highest since 2014. U.K. manufacturing unexpectedly grew at the fastest pace in three years in April as the domestic market strengthened and the pound’s decline boosted exports. Meanwhile, China’s private PMI tumbled to lowest level in months.
A measure of factory output in the UK rose to 57.3 from 54.2 in March, according to Markit’s PMI. That’s far better than the decline to 54 forecast by economists in a Bloomberg survey and above the 50 level dividing expansion from contraction. The report reinforces the view that exporters are in what Bank of England Deputy Governor Ben Broadbent has called a “sweet spot,” since the currency’s decline has increased competitiveness, while the U.K. still enjoys free trade with the European Union single market.
China’s factory sector lost momentum in April, with growth slowing to its weakest pace in seven months as domestic and export demand faltered, a private survey showed on Tuesday. The findings echoed those in official manufacturing and service sector data on Sunday, reinforcing views that China’s economic growth remains solid but is starting to moderate after a surprisingly strong start to the year. The Caixin PMI fell to 50.3 in April, missing economist forecasts’ of 51.0 and a significant decline from March’s 51.2.
Australia’s central bank held rates steady for a 9th consecutive month in a widely expected decision as it sought to balance the risk of busting a debt-fuelled property bubble against subdued inflation and wages growth. The RBA sounded optimistic about economic growth, but added a new line in its statement warning wages growth was expected to remain slow “for a while yet”. The decision to stand pat comes amid continued concerns around a possibly overheated property market, although those worries were tempered marginally yesterday as house price growth slowed markedly in April.
The US dollar is slightly up in the morning as the market awaits tomorrow’s meeting of the Federal Reserve. However, the latest figures from the US economy were rather weak, which doesn’t bode well ahead of the central bank’s decision.