GBP/USD under pressure following flash manufacturing and services PMI report

GBP/USD under pressure following flash manufacturing and services PMI report
  • UK missed the analysts forecasts for flash manufacturing and services PMI in November.
  • Flash services PMI dropped to 40-month low in November.
  • Chris Williamson of IHS Markit says UK's economy is likely to drop by 0.2% in Q4 of 2019.
  • U.S flash manufacturing PMI to be announced at 14:45 GMT on Friday.
  • German flash services PMI missed the estimate in November.
  • GBP/USD and EUR/USD under pressure following the report.

According to the IHS Markit preliminary report announced on Friday, contraction in the United Kingdom’s manufacturing sector activity has risen sharply in November. The UK Manufacturing Purchasing Manager’s Index (PMI) has been noted at 48.3 in November that marks the lowest for the index in the previous two months, as per the report. Analysts had previously forecasted 49.0 for the index this month while 49.6 continues to be the six-month high for the Manufacturing PMI.

UK Flash Services Business Activity Index Dropped Sharply To 40-month Low In November

On the other hand, the Flash Services Business Activity Index of the UK presented an even sharper drop to 48.6 in November. The figure marks the lowest for the index in the past 40 months. Experts had predicted the index at 50.0 this month.

Chief Business Economist, Chris Williamson of IHS Markit stated that while the figures may have been the worst since the recession back in the year 2008, the sharp decline in the business output doesn’t come as a surprise since the Brexit uncertainty and the upcoming general election are keeping the orders under pressure.

He further added that the current figures are hinting at the need for the Bank of England to add stimulus and boost the economy. At this rate, he commented, the UK’s GDP in the last quarter of 2019 can be expected to drop by 0.2%.

Data for Germany announced earlier this morning hasn’t been entirely positive either. While the German flash manufacturing PMI beat the analysts’ forecast of 42.9 and printed at 43.8 in November, the German flash services PMI was reported a little shy of the estimate (52.0) and was noted at 51.3, as per the report. Readings for flash manufacturing PMI and flash services PMI in October were 42.1 and 51.6 respectively. Flash manufacturing PMI for the United States of America is set to be announced later today at 14:45 GMT.

Response In The Forex Market

As always, data from the IHS Markit preliminary report have casted a strong impact on the Forex market. Sterling was reported to have lost traction immediately following the report. Cable dropped below 1.29 level and is currently settling around 1.2875 marking a loss of around 0.57% for the day. The pair made a daily low of 1.2863 on Friday.

EUR/USD, on the other hand, continues to struggle below 1.1100 level. Having made a daily low of 1.1047, the pair is currently trading at 1.1065. The U.S flash manufacturing PMI is expected to be the next market mover for today.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.
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