Pound Sterling declines on weak UK flash PMI data
The Pound Sterling (GBP) faces intense selling pressure against its peers on Tuesday after the release of the weak preliminary United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI) data for September. The S&P Global reported that the Composite PMI came in lower at 51.0 against estimates of 52.7 and from 53.5 in August, indicating that the overall business activity expanded, but at a moderate pace.
A slowdown in the overall business activity growth came on the back of continued weakness in the manufacturing sector. The Manufacturing PMI contracted to 46.2, while it was expected to remain steady at 47.0. A figure below 50.0 is considered as contraction in business activity. Meanwhile, the Services PMI dropped to 51.9 from estimates of 53.5 and the prior reading of 54.2.
“September’s flash UK PMI survey brought a litany of worrying news including weakening growth, slumping overseas trade, worsening business confidence and further steep job losses," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence,said.
A slowdown in the overall UK business activity has come at a time when the Pound Sterling has been under pressure due to the worsening domestic fiscal situation. Mounting UK public debt and surging Gilt yields are weighing on the economic growth outlook, paving the way for more taxes by the government in the release of the Autumn Budget in November.
Last week, the data showed that UK public sector net borrowing hit £18 billion, the highest level seen in five years.
Meanwhile, investors seek fresh cues about whether the Bank of England (BoE) will cut interest rates again in the policy meetings remaining this year. Last week, the BoE held interest rates steady at 4%, as expected, and retained a “gradual and careful” monetary easing approach.
Source: Fxstreet
