There was plenty of manufacturing misery in store for sterling this Monday, the currency’s initial losses exacerbated by a disappointing PMI reading.
The UK manufacturing PMI fell from 56.7 in August to 55.9 in September, that figure a decent whack lower than the 56.3 forecast by analysts. And while that leaves the manufacturing sector in decent shape across the third quarter, the market never appreciates signs of a slowdown, especially when they are likely linked to the thick fog of uncertainty still surrounding Brexit.
This meant that cable’s losses got wider and wider as the day went on, the pound plunging 0.8% against the dollar to hit $1.33 for the first time in 2 and a half weeks. Against the euro, meanwhile, sterling reversed its initial 0.1% rise, and now finds itself back below €1.135 after falling by that same amount. The FTSE was pretty damn pleased with the currency’s manufacturing melancholy, jumping more than half a percent to hit a 7400-crossing 2 and a half week peak (see how closely the FTSE and cable’s fates are intertwined?)
Over in the eurozone there weren’t really any manufacturing surprises, even if the region-wide figure did come in a smidge lower than the 58.2 flash reading in September. Nevertheless, at 58.1 the reading was still a 6 and a half year high, further emphasising the divergent paths the UK and eurozone economies appear to be on.
This news failed to provide solace for the euro, however, which remained down 0.6% against the dollar as investors processed the violence surrounding the Catalonia independence referendum on Sunday. The Spanish IBEX was also in a dour mood, falling 1.1%; the DAX, on the other hand, carried the impressive run it saw in September over to October, climbing 0.5% to tickle 12900.
Looking to the afternoon and even with a jacked-up dollar the Dow Jones is set to re-cross 22400 with a 40-ish point rise. Of course, the US also has its own manufacturing data to process this Monday; the Markit reading is set to rise from 52.8 to 53.0 month-on-month, while the ISM figure is expected to drop from 58.8 to 57.9.
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