Private DCN Private DCN - Sterling

GBP: sterling remains vulnerable

By Ricky Bean April 5th, 2017

The British pound sterling was once again vulnerable yesterday. On Monday the manufacturing purchasing managers’ index showed that while the sector was still growing, it had lost some of the momentum from the previous month, which was also revised downwards. Yesterday construction PMI data echoed this trend. The headline number represented the joint slowest rate of growth since September last year.

The up to 20% drop in sterling since the EU referendum has increased the price of raw materials, particularly for those businesses that haven’t sufficiently hedged their foreign currency exposure, and higher inflation has hit consumer spending.

Meanwhile, the Bank of England has voiced its concerns about the rapid increase in consumer borrowing. This is seen as a risk to the UK’s financial stability as consumers could default during an economic downturn.

Today we have the release of the PMI for the UK’s largest sector, services. The services sector accounts for close to 70% of the country’s economic activity. The data is likely to cause more sterling movement especially if it echoes those for construction and manufacturing.