Pound V euro: GBP edges lower as UK factory activity slips further than expected
THE pound is trending lower against the euro this morning following the release of a disappointing manufacturing PMI from the UK.
GBP/EUR is currently at around €1.124, down by around 0.4 per cent from this morning’s starting levels.
According to figures published by IHS Markit, UK factory activity slowed last month, with the manufacturing index sliding from a multi-year high of 58.2 to 56.3 – a more modest dip to 58 had been forecast.
The slowdown was largely attributed to moderated output growth and new orders, with a number of the firms surveyed also concerned about rising input costs denting profits.
However, despite the dip analysts remained positive, suggesting that the reading was still strong and evidence that the sector continued to expand at a robust rate, with firms optimistic about the chances of further growth in 2018.
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The outlook is also reasonably bright
Rob Dobson, Director at IHS Markit said: “The sector has broadly maintained its solid boost to broader economic expansion in the fourth quarter.
"The outlook is also reasonably bright, with over 50 per cent of companies expecting production to be higher one year from now.”
The dip may dampen fourth quarter growth expectations however as a stronger reading may have supported a possible uptick in GDP at the end of the year.
At the same time, the euro strengthened this morning as the Eurozone’s own manufacturing PMI reading confirmed that factory activity in December reached its highest levels since the survey began in 1997.
Economist predicts STRONG next year for pound sterling
The final reading published by Markit showed that the index climbed from 60.1 to 60.6 in December, in line with the initial estimate released last month.
The uptick was supported by strong readings from Germany, Austria and Ireland, all of which were at or close to record highs.
The latest reading caps off a stellar year of growth in the Eurozone in 2017, with the bloc appearing to have finally recovered from the Eurozone debt crisis five years ago.
Looking ahead, the GBP/EUR exchange rate may dip again on Wednesday with the publication of Germany’s latest employment figures as economists forecast that the jobless rate will have fallen from 5.6 per cent to 5.5 per cent in December.
Meanwhile, the pound may see some support tomorrow from the release of the UK’s latest construction PMI, which is expected to have risen slightly from 53.1 to 53.2 last month.
However, with the sector only accounting for a very small portion of UK economic growth, any gains provided by the index are likely to be slight.
