Weak UK manufacturing data and Brexit uncertainty dragged the pound lower on Thursday. The pound euro exchange rate declined 0.5% to close at €1.1770, slightly above the day’s low of €1.1744. The pair is edging lower across the Asian session heading into Friday.
The pound was under pressure in the first day of trading in 2020 as investors fretted over the health of the UK economy and over future UK-EU relation.
Manufacturing PMI data showed that activity in the UK manufacturing sector slowed again in December to just 47.5 in the final revision. The reading missed estimates of 47.6 and was down significantly from 49.1 in November. On the index 50 separates expansion from contraction.
PMI data dragged on the pound as it not only missed estimates, but also showed that UK manufacturing output declined at the fastest pace since 2012. Slowing global demand plus UK firms reducing inventory stockpiled in the case of a no deal Brexit has dragged on the manufacturing sector. With Brexit uncertainty set to continue, 2020 could see the UK economy once again overly reliant on consumer spending for another year.
Today investors will look towards several mid-tier data points including housing price data and construction PMI figures. Analysts are expecting the construction sector to have remained in contraction in December at 45.8, up marginally from 45.3.
German Inflation & Unemployment Data Up Next
The euro was also broadly weaker on Thursday, albeit stronger than the pound. The euro weakened owing to the stronger dollar pressurising the common currency and weak manufacturing PMI data.
Manufacturing activity in the eurozone contracted for an 11th straight month in December according to a closely watched survey. The PMI index fell to 45.9 in December down from 46.9 in the previous month. Germany was a notable drag with the manufacturing sector falling deeper into contraction at 43.4, down from 44.1. These figures disappointed market participants who were hoping to see an improvement entering the new year.
Today investors’ attention will remain firmly on the economic calendar with the release of German unemployment data and German inflation data to give further impetus.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.13990 EUR Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound. Or, if you were looking at it the other way around: 1 EUR = 0.87271 GBP In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro. |
