Sterling Remains Beholden to Brexit News
- UK Manufacturing PMI strong as firms boost their inventories, outlook uncertain.
- Brexit uncertainty remains the only driver of Sterling price action.
See how our Q1 2019 Trading Forecasts for GBP can help you when trading.
Sterling (GBP) on the Brexit Backfoot
The British Pound starts the year as it finished last year - totally driven by Brexit and related political noise. The latest UK Manufacturing PMI (December) showed a decent beat, 54.2 against expectations of 52.5 and a prior month’s 53.6, but a breakdown of the figures revealed that the six-month high was due to short-term boosts to inventory holdings and inflows of new business. According to Roy Dobson, director at IHS Markit,
“December saw the UK PMI rise to a six-month high, following short-term boosts to inventory holdings and inflows of new business as companies stepped up their preparations for a potentially disruptive Brexit...Although manufacturers forecast growth over the coming year, confidence remains at a low ebb. Manufacturing will therefore be entering 2019 on a less than ideal footing with Brexit uncertainty having intensified considerably."
Sterling currently trades either side of 1.2700 against the US dollar after making a one-month high yesterday around 1.2815. The Markit services and composite PMIs are released on Friday with both readings just above the 50 level. A PMI above 50 represents expansion compared to the previous month, while a reading under 50 represents a contraction. A slip below the 50 level could see Sterling move lower.