Pound jumps as United Kingdom construction sector bounces back

Marco Green
May 3, 2018

On the other side of the pairing, the United States dollar has been in high demand thanks to rising optimism about the US. New export orders rose during March, thereby marking a six-month period of growth. Gauges of new orders and exports weakened to the lowest levels since mid-2017, while manufacturers took on staff at the slowest pace since February previous year.

China's manufacturing sector isn't growing as fast as it was earlier in the year, weighed down by a weakening demand from overseas.

The Purchasing Managers' Index, or PMI, edged down to 57.2 in April from 57.3 in March. But growth in export orders slowed sharply to only marginal levels due to a stronger yen. It is based on several indicators including output, new orders, backlogs, output and input prices, suppliers' delivery times, stocks of finished goods, purchases, employment and future production.

Data yesterday showed that South Korean exports declined last month for the first time in 18 months.

Goods manufacturers raised their output for the ninth successive month in April even as the rate of rise gained pace.

Business growth in the United States and Europe, while still strong, has slowed to more modest levels with USA manufacturers complaining about rising commodity prices in anticipation of trade tariffs. On the price front, input price inflation remained marked in April, mainly driven by higher raw material costs. The PMI's gauge of factory cost pressures cooled to a nine-month low, something that will be noted by BoE rate-setters who are keeping an eye on inflation pressures ahead of next week's policy decision.

A resurgent USA dollar against emerging market currencies could also restore some of Asian exporters' competitiveness.

However, that may not apply to the trio of Asian countries with trade deficits - India, Indonesia and Philippines - which have recently taken a one-two punch.

In a statement, Nikkei said the latest reading was the highest so far for the year, signaling an improvement in the sector's health.

The first cause for optimism regards the Federal Reserve's interest rate decision tomorrow, which could see policymakers drop hints about the likelihood of near-term interest rate hikes.

Tuesday's data will be important for the narrative around Sterling, particularly in the context of recent events that have buffeted the currency and whittled the prospect of a May interest rate rise from the Bank of England (BoE) down to near zero.

Other reports by Click Lancashire

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