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Sterling (GBP) Slips Lower Despite Strong Manufacturing PMI Headline

Sterling (GBP) Slips Lower Despite Strong Manufacturing PMI Headline

Nick Cawley, Strategist

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.

GBPUSD Daily Price Chart (February 2018 – January 2, 2018)

Sterling (GBP) Slips Lower Despite Strong Manufacturing PMI Headline

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on GBPUSD – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author at nicholas.cawley@ig.comor via Twitter @nickcawley1.

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

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