Following the release of UK manufacturing data for May, the Pound held gains against the Euro and remained slightly softer against the US Dollar.
Sterling was boosted at the close of last week by impressive UK consumer confidence and house price reports.
The British asset largely held these gains over the weekend and continued to perform well against its rivals as a measure of the UK manufacturing sector showed that growth continued in May.
Markit’s PMI provided a reading of 57.0 in May, down slightly from the previous month’s 57.3 result but still well clear of the expansion/contraction dividing line.
According to Markit economist Rob Dobson; ‘The revival of UK manufacturing continued in May, as the sector basked in one of its brightest growth spells of the past two decades. […] Sustaining the rebound and continuing to push towards rebalancing the UK economy towards manufacturing therefore remains critical. On those scores the latest survey provides some real positives.’
Separate UK data showed that domestic mortgage approvals fell by more than expected in April.
Approvals dipped to 62,900 from 67,100 in April.
The Euro meanwhile was feeling the heat as a manufacturing report for the currency bloc showed that growth in the sector slowed by more than expected last month.
The PMI actually produced a reading of 52.2 in May, down from a previous estimate of 52.5 and considerably less than April’s result of 53.4.
The gauge did remain above the 50 mark separating growth from contraction for an 11th month, but it showed that the slowdown in France is having an adverse impact on the stability of the Eurozone as a whole.
Over the last few weeks the odds of the European Central Bank introducing additional stimulus at its June policy meeting have risen considerably, and this morning’s figure adds to the case for further fiscal support.
The Pound is currently 0.20 per cent stronger against the Euro, although further fluctuations can be expected to follow the release of German inflation figures at 13:00 GMT.
However, while Sterling was able to advance on the Euro its relationship with the US Dollar was less bullish.
The ‘Greenback’ was holding its own on Monday as investors bet that today’s US manufacturing report will show the fastest pace of expansion for 2014 so far.
The US manufacturing index is expected to come in at 55.5 following the reading of 54.9 in April.
As well as maintaining a more upbeat position against the Pound, the US Dollar was performing well against the Euro and Yen.
This week is much more data-heavy than last week and Pound volatility could be occasioned tomorrow by the UK’s construction PMI.
Nationwide’s house price report will also be of interest.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6730,
Pound Sterling,,Euro,1.2302,
Pound Sterling,,Australian Dollar,1.8081,
Pound Sterling,,New Zealand Dollar,1.9790,
US Dollar,,Pound Sterling,0.5975,
Euro,,Pound Sterling,0.8125,
Australian Dollar,,Pound Sterling,0.5529,
New Zealand Dollar,,Pound Sterling,0.5053,
[/table]
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