The Pound benefitted yesterday as August’s Manufacturing PMI result came in better-than-expected at a 2.5-year high of 57.2. Smashing forecasts of 55.0, the impressive factory output figure marked the fifth consecutive month of expansion for British Manufacturers. To add shine to an already glittering report, the New Orders indicator surged at its fastest pace since 1994.
Sterling struck a 2-month high of 1.1801 against the Euro in response to the result and also rallied by around 0.6 cents against the US Dollar.
In addition to the impressive Manufacturing reading, the Pound was boosted by news of a deal between Vodafone and Verizon. UK-based Vodafone is to receive around $130 billion from the agreement, of which approximately $60 billion will be cash funds. With a large influx of funds on its way to the UK, some investors looked to pre-empt the transaction by buying into Sterling at around midday.
This morning’s Construction PMI is forecast to come in at 56.9, marginally lower than July’s 3-year high of 57.0. Nevertheless the high score is likely to be interpreted positively for the Pound as markets come round to the fact that British third quarter growth may be slightly higher than they had pencilled in.
On Wednesday the highly anticipated UK Services print is likely to show a slight drop-off from July’s outstanding 60.2 score but, at 59.0, the result is still liable to bolster demand for Sterling.
The single currency was unlucky to lose out against the Pound yesterday, as it celebrated a 26-month high Manufacturing reading of its own. With data right across the currency bloc finally showing signs of a significant revival it is possible that decent German growth could drive the 17-nation bloc towards a respectable GDP score in the third quarter.
However, dark mutterings within financial markets suggest that European Central Bank President Mario Draghi could unleash a new round of non-standard monetary policy at his meeting this Thursday, and this is weighing on sentiment towards the single currency. Draghi spoke of soft credit growth levels at his last meeting and, with funding at a low not seen since he last intervened in 2011, it is moderately possible that he will look to boost liquidity with some new measures this time out.
The US Dollar was fairly quiet on financial markets yesterday as US traders took a day off for Labour Day. However, risk sentiment did pick up some steam in relation to comments from US President Barack Obama with regards to the crisis in Syria. Obama said that he intends to take his proposal for military intervention in the Middle Eastern country to Congress before taking the notion any further. Yield-hungry investors interpreted this as a bullish signal because, at the very least, it delays the date upon which markets are thrown into disarray by a potentially inflammatory military strike.
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