UK PMI tops estimates but still below 50

Summary:

• UK Manufacturing PMI: 49.6 vs 48.2 exp. 

• 2nd consecutive beat but 6th in a row sub 50

• EURGBP remains in a narrow range

For the month of October a widely followed gauge of activity on UK manufacturing has once more signalled weakness in the sector. Having said that, the manufacturing PMI reading of 49.6 was higher than both the expected reading of 48.1 with the previous of 48.3 (It was also above the latest South African equivalent ahead of tomorrow’s Rugby World Cup final).

The reading has moved back up to its highest level in 6 months but remains below the 50 mark still. Source: IHS Markit/CIPS 

Part of the increase can be attributed to stockpiling ahead of the previous Brexit deadline of October 31st and even with this boost, the data still marks 6 consecutive months this metric has come in below 50 and therefore in contraction territory, the longest such run since 2012. Looking at the breakdown there’s not too much to get excited about with downturns seen in output, new orders and employment.     

Now that Brexit has been “flextended” and a December 12th election called there’s a good chance that, for the next couple of weeks at least, we see politics retreat from its role as the almost sole driver of the pound and economic data take on a greater level of importance.

EURGBP has been in a narrow range lately as the market consolidates after a sharp drop lower. Near-term support may be found around 0.8575 with 0.8680 offering potential resistance. Could be seen as a bear flag forming. Source: xStation