Summary:
- UK manufacturing PMI beats expectations in June, but stays unchanged compared to the prior month
- Moods among managers stay quite lacklustre, construction and services PMIs could be critical for GDP growth in Q2
- GBP trades lower on the day, but a pivotal support stays in place
UK manufacturing PMI remained at 54.4 points in June beating the median estimate placed at 54. The pound stayed barely changed following the release losing 0.4% against the US dollar as of 10:35 am BST.
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UK manufacturing PMI held steady in June. Source: Macrobond, XTB Research
Even as the headline did not move at all in June business optimism dropped to the lowest level in seven months mainly on the back of trade war concerns, Brexit as well as the currency fluctuations. Higher input prices flagged by managers should not be a surprise given a heavy increase of oil prices (notice that higher PPI has been reported almost everywhere of late). However, they also reported some shortages of raw material being a possible hazard to further production growth. Taking into account that manufacturing is not the most crucial part of the UK economy one may suspect that PMIs concerning construction and especially services could turn out to be critical in terms of GDP growth in the second quarter. Those PMIs will be published later this week. Notice that so far the quarterly average of PMIs does not imply a significant bounce compared to the first three months when MPC policymakers blamed harsh weather and called the slowdown as transitory. Keep in mind that after the latest BoE meeting the odds for a hike in August hover nearby 65% suggesting there is still some room for the pound to appreciate.
The GBPUSD keeps trading above its crucial support placed at 1.3050. Until the pair is able to hold above this level bulls may hold out hope for a bounce at least toward 1.36 where the more noteworthy resistance is placed. Source: xStation5
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