Home > Resource Hub > Daily Market News > Tory Party Conference hammers confidence in Sterling

Tory Party Conference hammers confidence in Sterling

Tory Party Conference hammers confidence in Sterling

Sterling suffered yet another sell-off yesterday morning, slumping as low as 1.1440 against the Euro and 1.2820 vs US Dollar. Investors have been put off by Theresa May’s apparent calm attitude to leaving the single market. It seems that she prefers to focus on immigration and UK sovereignty rather than the economic consequences of a Brexit. A ‘hard Brexit’ is seen by investors as posing a significant threat to the UK financial sector and potentially undermining the wider economy.

The UK’s manufacturing sector surged in September, growing at its fastest level since June 2014. The UK PMI manufacturing data beat expectations with an increase to 55.4 for September from a revised 53.4. The data maintained underlying expectations of a firm near-term economic tone. Construction and services-sector data will be watched closely over the next two days to see if these expectations will be maintained.

The Eurozone PMI manufacturing data was at a three-month high, in line with the flash readings. With no developments on the Deutsche bank story, the Euro avoided any reason for a sell-off. As a consequence, the Euro is now trading at its strongest versus the Pound since the referendum. The single currency overall was confined within narrow ranges with support on approach to the 1.1200 level as trading volumes were reduced by the German market holiday.

US Markit PMI manufacturing index was revised marginally higher to 51.5 from 51.4 previously while the construction spending data was weaker than expected. The ISM manufacturing index was also stronger than expected with an increase to 51.5 for September from the previous figure of 49.4. The orders and production indices both rebounded back above the 50 level while employment was just below the unchanged level.

The data helped underpin confidence in the US outlook which provided some net Dollar support ahead of further important releases over the second half of this week. November rate increase expectations are still only at around 10% while the potential for a December (post US presidential elections) rate move is around 55%.

Data to watch: UK 9.30am UK PMI Construction (Sep). 10am Euro Producer Price Index (Aug).

Share this case study
Set yourself up in minutes, make payments the same day: it’s free, easy and without obligation.