Summary:
- UK manufacturing PMI falls in May the most since the 2016 Brexit referendum
- A substantial decline is a result of huge stockpiling seen in April
- EURGBP struggles with the upward trend line
Steep decline
Start investing today or test a free demo
Open account Try demo Download mobile app Download mobile appUK manufacturing PMI declined substantially in May after a rise steered by heavy stockpiling in anticipation of Brexit being initially set on March 31. The British pound barely responded to the reading and currently it is trading slightly higher against the greenback. In turn, the UK FTSE100 (UK100) is sliding 0.4% after three hours of trading.
UK manufacturing PMI saw the heaviest monthly decline in May since the 2016 Brexit referendum. Source: Macrobond, XTB Research
In May, UK manufacturing PMI slumped to 49.4 from 53.1, reaching its 34-month low and seeing the heaviest monthly decline since July 2016, shortly after the Brexit referendum. The details of Markit survey pointed to “increased difficulties in convincing clients to commit to new contracts during May”. To a large extent, this was an effect of the high level of inventories because manufacturers decided to increase inventories ahead of the expected (initial) Brexit date set on March 31. This component was the prime reason behind a rise in manufacturing PMI in April, hence the similar move could be expected to occur in the fall as the new Brexit date has been set on October 31. On top of that, the survey showed a deterioration in both domestic and foreign new orders while manufacturers reported lower demand from Asia and Europe. In terms of employment, we saw the second straight month of contraction as respondents cited difficulties in recruiting appropriate staff among reasons behind such deterioration. On the prices front, output charges inflation reached a 3-month high, while input prices edged down - a positive signal as far as companies’ margins are concerned. Overall, manufacturers remained positive with regard to the future output (next 12 months) as 49% of them expected production to increase over that period of time.
Pound keeps struggling
Looking at the weekly chart of the EURGBP cross one may notice that the uptrend does not to be ended any time soon. Admittedly, the price has approached the notable resistance in the form of the trend line, bulls seem to be sufficiently mobilized to keep pushing higher. If so, another resistance could be localized at 0.8930.
The EURGBP keeps pushing higher following the weaker than expected manufacturing PMI in May. Source: xStation5
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
