GBP/USD keeps the red around 1.2100 as UK Aug Manufacturing PMI hits seven-year lows

The UK manufacturing sector activity downturn deepened further in the month of August, the latest survey report from IHS Markit showed this Monday. 

The seasonally adjusted IHS Markit/CIPS UK Purchasing Managers’ Index (PMI) plunged to seven-year lows of 47.4 in August versus 48.4 expected and six-and-half-year lows of 48.0 seen in July.

Key Points:                

New orders contract at fastest pace in over seven years.

Business confidence falls to series-record low.

Rob Dobson, Director at IHS Markit, commented on the survey:

“High levels of economic and political uncertainty alongside ongoing global trade tensions stifled the performance of UK manufacturers in August. Business conditions deteriorated to the greatest extent in seven years, as companies scaled back production in response to the steepest drop in new order intakes since mid2012.

Based on its historical relationship against official ONS data, the latest PMI Output Index is consistent with a quarterly pace of contraction close to 2%. The outlook also weakened as the multiple headwinds buffeting the sector saw business optimism slump to a series-record low.”

FX Implications:

The awful UK Manufacturing sector activity numbers add to the bearish sentiment around the pound. The Cable slipped to nine-day lows of 1.2094 after Brexit uncertainty heightened on rising no-deal Brexit fears and risks of a general election.

Leading Conservative Party rebel David Gauke said he doesn’t think that MPs would be able to block a no-deal Brexit via legislation. Meanwhile, PM Johnson threatened to oust Conservative rebels of their party membership should they fail to back him in a key Brexit vote on Tuesday.

GBP/USD Levels to consider: