Home Daily Commentaries UK data reveals fastest manufacturing growth in two years

UK data reveals fastest manufacturing growth in two years

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Thursday 25 July, 2024

Daily Currency Update

Germany's economy slipped back into contraction at the start of the third quarter, weighed down by a sluggish manufacturing sector. There was also a broad-based decline in employment, which added to the Euro's woes yesterday. Economists now predict economic output will shrink by 0.4%, which has increased speculation of a cut in interest rates by the ECB at their September meeting.

The Pound gained today versus the Euro after a survey showed business activity this month was stronger than in Eurozone countries. The UK witnessed the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023. The Pound has been bolstered in 2024 by a growing economy, stable political environment, and a Monetary Policy Committee that has kept rates higher for longer.

The US Purchasing Managers Index (PMI) fell yesterday into contraction territory with a print of 49.5 versus last month's 51.6. Economists are predicting that US manufacturing will slow further, and markets are now pricing in a 100% chance of a rate cut by the Federal Reserve at their September meeting. The US Dollar remained range-bound through Tuesday's session.

Key Movers

Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, noted that weak demand in the Eurozone's largest economy has slowed the German economy, in contrast to France, which has seen an uptick due to preparations for the Olympic Games. Both markets and ECB council members now expect two rate cuts by the ECB through the rest of this year.

The Purchasing Managers Index (PMI) in the UK exceeded expectations, showing an increase to 52.7 versus the anticipated 52.6, and firmly surpassing last month's figure of 52.3. The first post-election business survey will be welcomed by the new government, as companies are optimistic about the future. Inflation has also slowed, increasing the chances of a summer rate cut by the Bank of England.

Following yesterday’s US PMI miss, investors will now await the release of Q2 GDP figures, durable goods data, and weekly jobless claims, all due later today. With signs of disinflation in the US, investors are increasingly confident of a rate cut in September, but Federal Reserve officials have been hesitant to support this view, leaving the US Dollar and equity markets on edge.

 

Expected Ranges

  • GBP/USD: 1.2860 - 1.2930 ▲
  • GBP/EUR: 1.1870 - 1.1915 ▲
  • GBP/AUD: 1.9675 - 1.9725 ▲
  • EUR/USD: 1.0820 - 1.0875 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.