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Cable Retreats after UK Report Signals Slowing Manufacturing Growth

Cable Retreats after UK Report Signals Slowing Manufacturing Growth

Benjamin Spier, Technical Strategist

THE TAKEAWAY: UK manufacturing PMI comes in at 50.5, below expected 51.5 -> slowing manufacturing growth can be contributed to steep fall in new exports -> Cable drops back from six month high

United Kingdom Purchasing Managers’ Index for Manufacturing for April came in at 50.5, below analysts’ expectations of 51.5, as new export orders fell at their steepest pace since May 2009. Although the PMI is still above 50 and therefore considered positive, the index is down from last month’s 51.9 revised level.

New exports orders fell because of weaker demand from mainland Europe, US and East Asia. Higher prices contributed to the manufacturing slowdown in the second half of 2011, meaning that the industrial recovery could be slow for some time.

The PMI Manufacturing is a gauge that weighs manufacturing activity as well as future outlook. Markit Economics and the Chartered Institute for Purchasing and Supply release the monthly index, which is based on a survey of business executives in the private sector.

It is the fifth month in a row that the manufacturing PMI came in above 50, signaling expansion. However, the slowing manufacturing growth comes a couple days after a technical recession was initiated in the UK when GDP was reported lower for 2 quarters in a row.

Cable_Retreats_after_UK_Report_Signals_Slowing_Manufacturing_Growth__body_gbpusd.png, Cable Retreats after UK Report Signals Slowing Manufacturing Growth

Cable fell sharply following the weak manufacturing data, dropping back below the 1.6200 line. Just yesterday, the pair made a new six month high just short of 1.6300, but retracted earlier today. EUR/GBP continued its climb higher after the PMI release, also spurred by an already climbing Euro.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.