Sterling Jumps Following Manufacturing Data

Thursday, 1st September: Sterling received a boost today as the manufacturing Markit/CIPS purchasing managers’ index (PMI) data was revealed. The sector rose to 53.3 in August, a large leap from a 3 year low 48.3 in July. A figure above 50 indicates expansion in the sector. The August figure is a 10 month high and Markit said the month-on-month increase was the joint largest in the survey’s 25-year history. The PMI figure led to sterling climbing nearly 1% following the release. It sat at $1.3267 against the dollar,  remaining above $1.324 over the course of the day before another spike mid afternoon led it to reach nearly $1.332. At the time of writing GBP/USD is $1.3273. The pound also made gains against the euro following the data release, falling short of reaching €1.19 in mid-morning trade. GBP/EUR is currently €1.1858%.

However the bounce in sterling led to the FTSE 100 reversing slightly (the FTSE 100 is heavily made up of international earners) which has benefitted greatly from a weakened pound. The blue chip index ended ower by 0.52%. The more domestically orientated FTSE 250 however ended the day in the green, up by 0.66%.

The US announced their own manufacturing data, reversing what the UK demonstrated as the Institute for Supply Management (ISM) showed that manufacturing activity contracted in August, decreasing to 49.4 from 52.6 in July (just as a reading above 50 shows expansion in the sector, a reading below 50 shows contraction). The reading reflect mixed fortunes of American manufacturers as the dollar continues to be strong whilst global growth and more so domestic growth looks uncertain. Manufacturing data was also announced in China where PMI figures actually rose 0.5 points to 50.4 against the expectations of a fall in to contraction territory. It is China’s highest reading since October 2014. In Japan the Nikkei final manufacturing print for August was 49.5, down 0.1 points.

Brent oil continued with yesterday’s losses, falling more than 3% (at the time of writing), currently sitting at $45.78/bbl. In Europe the CAC closed flat whilst the DAX closed in the red, lower by 0.55% Ahead of tomorrow US jobs data the Dow Jones and S&P 500 are both currently trading lower by c.0.5%.