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US manufacturing PMI came in under forecasts in August, yet the US dollar was little moved.
Currency markets were dominated by a risk-off tone on Tuesday. Geopolitical uncertainty and continuing weakness in American manufacturing meant that the US dollar benefitted from safe-haven trades and European currencies struggled.
GBP/USD lost almost half a cent through the afternoon session and sterling slipped by a slightly smaller margin against the euro. EUR/USD came under some pressure but only lost a marginal amount of value on the day.
The main data set piece came in the form of US ISM Manufacturing PMI, which came in under forecasts of 47.5 at 47.2 in August. For reference, US manufacturing has reported contraction (i.e. a score under 50) in 21 out of the last 22 months, laying bare the impact of higher borrowing costs.
A smaller component of the study, which tracks employment in manufacturing, increased from a score of 43.4 in July to 46 last month. That helped to temper some of the disappointment from the main score’s miss, although not by much. Keep an eye out for the sister survey – the ISM Services PMI – when it arrives tomorrow.
Government debt auctions are usually sleepy affairs but yesterday was a little different. £8bn in UK treasuries attracted £110bn worth of offers, which matched the record for the volume of offers relative to the chunk of debt on offer. The news will be welcomed by the new Labour government; increased demand for debt typically means investors get compensated with a lower rate of interest, which was 4.375% in this case.
The price of brent crude oil fell to its lowest level since December yesterday. Fears of an economic slowdown and rising supply helped send the price of oil per barrel below $75.
Just days after a far-right eruption in German politics, car giant Vollkswagen announced it was considering closing factories in Germany for the first time in it 87-year existence. Unions have promised “fierce resistance” to the plans, which come as the previously solid manufacturing sector continues to struggle.
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GBP: BofA raises growth forecasts
Bank of America yesterday raised its growth forecasts for the UK economy to 1.1% in 2024 and 2025. Analysts now predict the economy will easily exceed the initial projection of 0.8% growth, with a decent chance it could drift even higher.
GBP/USD: the past year
EUR: Euro shrugs off German elections
According to ING, the results of the recent German state elections are not having any real impact on the euro. While that may be true, growing problems in Germany may weaken the euro in the longer term.
GBP/EUR: the past year
USD: US dollar remains protected
News of a contracting manufacturing sector had a small impact on the US dollar. A less than happy mood in markets meant there was plenty of safe-haven investment to offset any depreciation.
EUR/USD: the past year
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