Britain’s Manufacturing Hits Four-Month High
A better than expected UK Manufacturing PMI reading in August helped the Pound rise against the Euro. According to IHS Markit’s survey, despite Brexit uncertainty, producers were positive about the weaker Pound and strong global demand. The UK’s Manufacturing PMI in August remained below that of the Eurozone for a fourth consecutive month.
Liam Fox, the International Trade Secretary, said that the UK won’t be forced to pay more than it should in order to speed up a deal with the European Union (EU). In the US, investors and traders are expecting a series of data such as Nonfarm Payrolls, average hourly earnings and Markit’s manufacturing PMI due to be released later in the day. Analysts suggest that if earnings have picked up along with employment, a spike in the demand for the US Dollar should be expected.
Pound Sterling – UK Markets
Today, the Pound dipped against the US Dollar, with the exchange rate set at $1.29. Sterling strengthened against the Euro, with the exchange rate set at €1.08. The Pound got stronger against the single market currency when August’s Manufacturing PMI, published by IHS Markit, came out better than expected.
The survey showed that British factories shifted to a higher gear in August, propelled by a rise in output, new orders and employment. August’s 56.9 figure is a four-month high and easily beats the analysts’ expectations of 55. Domestic customers were the main reason for the rise in demand. New requests for exports came in from China, Europe and the US. Rob Dobson, director at IHS Markit, said that “the key question is if this positive start in the second half of the year can be sustained. At the moment, data suggest that the manufacturing economy remains in good health, despite Brexit uncertainty.”
The brawl between UK and EU officials continued with the International Trade Secretary, Liam Fox, saying that Britain must not be blackmailed into settling the “divorce bill,” before starting trade talks. “We should begin discussions on the final settlement because that’s good for business, and it’s good for prosperity,” said Fox and added “I think there is frustration because we are stuck on this separation issue and we aren’t able to get onto the issues that will matter in the long term.”
US Dollar – US Markets
The US Dollar jumped against the Euro with the exchange rate set at €0.84. The US currency continued to climb higher for a second straight day. The US Dollar Index (DXY), which measures the value of the Dollar against six major currencies, also moved higher at 92.77.
Treasury Secretary Steve Mnuchin said on CNBC that the US administration has a detailed tax plan ready and stressed that he is very excited about its prospects. Mnuchin revealed that the plan has been already presented to some members of Congress and that it will be released to the public by the end of September. The Treasury Secretary agreed that a 15% corporate tax would be ideal, but didn’t want to commit to that level.
Later in the day, data regarding Nonfarm Payrolls in August, the unemployment rate, average earnings and the manufacturing PMI is going to be released. Economists suggest that nonfarm payrolls will have increased by 180,000 jobs in the last month of the summer, after surging to 209,000 in July. They also predict that average hourly earnings will have increased by 0.2%.
Euro – European Markets
The Euro kept on dropping for a second day against the US Dollar, despite good news coming from the Eurozone’s manufacturing sector. The exchange rate set at $1.18, mainly because a Reuters report said that some European Central Bank’s policy makers are worrying about the Euro getting stronger than it should.
IHS Markit published its Manufacturing PMI August data for the Eurozone countries, which in most cases showed that the bloc’s economy is thriving. The Eurozone’s PMI, as a whole, improved to 57.4 from a 56.6 reading in July. In France, manufacturing growth was the strongest since April 2011, recording a six and a half year high for output and an eighty-month high for orders. In Italy, the manufacturing sector expanded with a pace that constitutes a six and half year high.
The Dutch manufacturing activity reached the stronger level since February 2011, with output growth being the strongest since May 2000. German factories increased their productivity rebounding from July’s five-month low figure. New orders rose for the 33rd consecutive month, while strong Asian demand boosted exports.
Other Currencies – Highlights
The Pound edged up against the Australian Dollar, trading at 1.62 AUD. According to AmpGFX analysts, data shows that there is a strong growth in public infrastructure spending. “The capital expenditure survey increased for the year ahead by the biggest margin since the mining boom, this time led by the service sector,” says the report. AmpGFX analysts note that building companies’ executives predict that the infrastructure boom will last up to ten years and will provide more profit than that of the housing market.
Sterling’s value increased against the New Zealand Dollar, trading at 1.80 NZD. A Westpac report said that the New Zealand’s terms of trade increased by 1.5%, in the second quarter of 2017, with the reading being a bit lower than a record high. Terms of trade, in the financial world, means the ratio of export prices to import prices. Export prices increased by 2.4%, while import prices increased by 0.9%. Economists at ANZ Bank believe that the terms of trade figures constitute a supportive force for national income growth and underpin the New Zealand’s currency valuation.
The Pound moved higher against the Swiss Franc, trading at 1.24 CHF. Swiss real retail sales in July disappointed the experts as they missed expectations, coming in at -0.7%, on a yearly basis, instead of an anticipated increase of 1.7%.