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UK manufacturing continues to build momentum

UK manufacturing continues to build momentum

UK PMI manufacturing edged up to 55.1 in March, just beating consensus forecasts but marking the 20th successive month of expansion. Manufacturing orders growth fell to a nine-month low and employment growth also slowed. Although the rate of price increases dipped, supply-chain pressures increased which will continue to hinder growth. Sterling impact was limited as markets focus on Thursday’s services sector data amid unease surrounding the retail sector outlook.

A mild increase in global risk appetite helped underpin the Pound as traders looked to take an optimistic stance on global growth. Sterling found support above 1.4000 against the Dollar, consolidating above 1.4050, while the Euro retreated to support below 1.1470. The latest BRC shop price data recorded a 1.0% year-on-year decline in prices, reinforcing expectations that wider inflation levels have peaked. Sterling maintains a firm tone on market open above 1.4050 against the Dollar and 1.1461 against the Euro.


The US IBD consumer confidence index decreased to 52.6 for March from 55.6 previously, although there was an underlying readiness to spend as auto-sales posted a significantly stronger-than-expected reading.

On the political front, Fed Governor Brainard was in a hawkish mood, in favour of gradual interest rate increases with its levels likely to move past neutral in the coming years. She also remarked that the expansionary fiscal policy could increase financial stability risks, whilst Minneapolis Federal Reserve Bank President and well-known monetary policy dove, Neel Kashkari, said the central bank is “pretty close” to neutral rates.

Finally, the White House announced that within the next few weeks the US will begin to impose a 25% tariff, targeting $50 billion worth of goods from China. The US Dollar rose against EUR, JPY, and CHF, but with a risk-on mood returning to traders, the Dollar fell against GBP, AUD and NZD.


The Euro is under pressure after German retail sales unexpectedly fell by 0.7% in February, along with a weaker manufacturing sector overall. The factory boom in the EU continued to wane into March. This is now the third month in a row where the index has declined. The PMI manufacturing survey dropped to 56.6 from a previous reading of 58.6.

Even with the headline manufacturing PMI cooling down in March but still reading well above 50-mark, the economic growth remains robust by historical standards, with all the major Eurozone countries rising strongly, including Greece, indicating broad-based expansion. Manufacturing activity is, therefore, seen as positively contributing to GDP growth in the first quarter, and the appearance of inflationary pressures will be welcomed by policymakers at the European Central Bank (ECB).

Investors today will confront the preliminary release of the latest Eurozone consumer inflation figures, which is expected to show reviving inflationary pressure. Any positive surprise will be seen as bringing the ECB closer to policy normalization and provide some immediate respite to the shared currency. However, a weaker reading should reinforce just how far away the ECB is from achieving its inflation target and might continue exerting downward pressure.

Data to Watch:

09:00 EUR Unemployment (Feb)
09:30 GBP PMI Construction (Mar)
10:00 EUR Unemployment Rate (Feb)
10:00 EUR Consumer Price Index – Core (YoY) (Mar)
10:00 EUR Consumer Price Index (YoY) (Mar)
13:15 USD ADP Employment Change (Mar)
14:45 USD Fed’s Bullard speech
14:45 USD Markit Services PMI (Mar)
14:45 USD Markit PMI Composite (Mar)
15:00 USD ISM Non-Manufacturing PMI (Mar)
15:00 USD Factory Orders (MoM) (Feb)
16:00 USD FOMC Member Mester speech

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