Nick Nasad
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Macro Data: Growth in UK Manufacturing Sector Slows

The air is coming out of the GBP today, with the currency sold heavily against the JPY and USD, while also struggling against the commodity bloc of currencies (AUD, NZD,CAD).

  • The data overnight was one catalyst for the slide in the GBP, as January's manufacturing PMI came in weaker than expected, posting a 56.7 reading compared to expectations of a 57.1.
  • Now, anything above 50 still means expansion, its just a cooling in that growth.
  • Looking at the graph above of the PMI overlayed with manufacturing output we can see that the sector looks to be topping off, and this data point if extrapolated could be implying that the strong run in the sector seen during the middle of 2013 may have peaked.
  • If so, and if other parts of the UK economy hit a rough patch, then the narrative about the Bank of England needing to raise interest rates sooner than the the BOE would like falls to the wayside.
  • We have already come some ways towards that conclusion as the BOE abandoned its forward guidance in regards to the unemployment rate.
  • Still, it doesn't make that much sense to me that the GBP would be sold off in comparison to commodity currencies and so while there may be some shifting expectations, I would look at some of these moves with a critical eye and perhaps as a chance to take advantage of an overshoot in the GBP weakness (especially against the AUD, NZD and CAD).