The US Dollar softened against the Pound on Monday afternoon after mixed manufacturing and construction data disappointed analysts.
The day’s US data releases got off to a promising start after Markit’s manufacturing purchasing managers index climbed to a three month high in May to reach 56.4.
The figure was up from the 55.4 figure seen in the preceding month and was better than the 56.2 reading forecast by economists.
“Purchasing managers reported a further surge in business activity in May. With the exception of a brief spell in early 2010, output is growing at the fastest rate seen since prior to the financial crisis.
‘The household sector in particular is leading the upturn, with demand for consumer goods rising at the fastest rate in four years. This is therefore very much a domestic led upturn, but it is encouraging to also that growth of export orders picked up in May, pointing to an improved trade balance in the second quarter,” said Markit’s chief economist Chris Williamson.
Despite the positive Markit data, the Institute for Supply Management’s factory index disappointed and seemed to conflict with the other data as it showed that factory output expanded less-than- expected in May.
The ISM PMI came in at 53.2 in May, down from the 54.9 recorded in April. Economists had been expecting a rise to 55.
New orders fell from 55.1 to 53.3.
The data’s employment sub index also dropped to 51.9 in May from the prior month’s figure of 54.7.
Any figure above 50 indicates expansion whereas one below indicates contraction.
A separate report which showed construction spending also came in below forecasts.
According to the Commerce Department, spending on construction projects increased by 0.2% in April, below forecasts for a rise of 0.6%.
Despite that, the actual figure was still the strongest performance since March 2009.
The Pound was unable to make further gains against the ‘Greenback’ as a report released earlier in the session showed that manufacturing activity in the UK ticked down in May.
GBP to USD update – 03/05/14
The Pound to US Dollar exchange rate experienced minimal movement on Tuesday following the release of mixed US manufacturing figures.
Although Markit’s manufacturing PMI was shown to have advanced from 56.2 to 56.4 in May, the ISM measure initially revealed an unexpected decline.
However, within a few hours the Institute for Supply Management had published a correction. The 53.2 reading originally reported was revised to 56.0, although this was later reduced to 55.4.
The errors were attributed to the misapplication of seasonally adjusted factors.
According to industry expert Stephen Carl; ‘The correction improved market direction modestly. Going forward, you’re looking for expected improvement in the ISM number, so maybe this just adds to it. Overall, it wasn’t a big, meaningful change, but there was certainly a reaction in the market’.
On Tuesday the US Dollar shed 0.15 per cent against the Pound as the British currency was supported by upbeat UK house price figures and generally positive local construction data.
The US Dollar was able to consolidate gains against the Euro however after inflation in the Eurozone was shown to have slowed by more than anticipated in May.
Euro losses were slightly moderated by a better-than-anticipated unemployment figure for the currency bloc.
Later today additional US Dollar movement may be triggered by domestic factory orders figures. The number of factory orders is expected to have risen by 0.5 per cent in April, less than half the 1.1 per cent gain recorded in March.
Of course, economists will also be looking ahead to tomorrow’s influential US employment figures.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5966,
US Dollar,,Canadian Dollar,1.0889,
US Dollar,,Euro,0.7350,
US Dollar,,Australian Dollar,1.0777,
US Dollar,,New Zealand Dollar,1.1815,
Canadian Dollar,,US Dollar ,0.9179,
Pound Sterling,,US Dollar,1.6764,
Euro,,US Dollar,1.3604,
Australian Dollar,,US Dollar,0.9276,
New Zealand Dollar,,US Dollar,0.8467,
[/table]
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