Play all audios:
This appreciation for Sterling has come on news of a minor rise in the UK manufacturing sector in March, as recorded in the latest PMI reading. The figure has risen marginally from 55 points
to 55.1, although this is still better than the predicted drop to 54.7 points. Commenting on the data, Rob Dobson of analysis company IHS Markit has stated: “The latest PMI survey provided
further evidence that UK manufacturing has entered a softer growth phase so far this year. Although the pace of output expansion ticked higher in March, which is especially encouraging given
the heavy snowfall during the month, this was offset by slower increases in new orders and employment.” Of the three major UK economic sectors (manufacturing, construction and services),
manufacturing is not considered to be the most important. As with the UK, the latest US PMI news has also covered the manufacturing sector, although the US readings have been far more
disappointing. Analysis company ISM has reported falling levels of manufacturing activity in March, as well as a slowdown in the growth of new orders for manufactured products. Hinting at
the possibility of further losses, one ISM correspondent was reported as saying: “New tariffs are causing concern across the supply chain. [The] full impact will take a few weeks to reveal
itself.” This sentiment, along with the falling figures, have led to clear US dollar losses today. Following on from today’s UK manufacturing PMI reading, the pound to US dollar exchange
rate could be further influenced by construction and services PMIs due out tomorrow and the day-after respectively. In both cases, levels of sector activity are forecast to decline, much
like today’s manufacturing reading. If these predictions prove accurate and levels of construction and services sector activity do drop then the pound could also slide against the US dollar.
The one saving grace could be a speech from Bank of England Governor Mark Carney on Friday. If Dr Carney provides an optimistic economic outlook this could give Sterling a boost. The next
high-impact US economic data will be out sooner, in the form of this afternoon’s ADP employment change for March as well as a PMI activity reading. The US dollar could recover against the
pound today if the ADP change in employed persons figure rises above last month’s 235k person figure. That said, USD traders could hold off on buying the currency if the ISM
non-manufacturing PMI for March shows reduced activity, as expected.