Pound Falls Towards January Lows Following Weak UK Manufacturing
THE TAKEAWAY: UK PMI manufacturing falls to an unexpected 45.9 -> Manufacturing sector sees first job losses in five month -> Cable nearing January lows
UK manufacturing slowed at the fastest pace since March 2009. Scaled back production and low employment led to a drop in the UK Purchasing Manager’s Index for manufacturing to 45.9 during the month of May. The index contracted from last month’s revised 50.2, according to Markit Economics, and disappointed expectations for 49.7. A reading below 50 shows a slowdown in manufacturing.
Markit Economics reported that the weakness in manufacturing resulted from worsening economic conditions and a subdued domestic market. Manufacturing production would have been worse if not for a backlog of existing contracts that needed completing. New export orders also fell for the second month in a row and the industry also reported job losses for the first time in five months during May.
Earlier today, the British Chambers of Commerce lowered its projected growth for the UK economy from 0.6% to 0.1% for 2012, the BCC also sees a 1.9% growth in 2013. Both the BCC and IMF are calling for increased stimulus to try and fight the effects of the euro-area crisis and keep Britain’s AAA rating.
Cable continued today’s fall towards January lows at 1.5232 following the weak UK PMI. EUR/GBP rose on the better than expected Eurozone PMI’s and continued its rally after the UK data release.
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