UK manufacturing/services PMI both miss - More important things on sterlings mind

Published date: 16/12/2019

UK PMI Manufacturing (Dec) 47.4 vs expected 49.2 prev 48.9 
UK Services PMI (Dec) 49 vs expected 49.5, prev 49.3

Both services and manufacturing PMI missed against expectations but the main focus will still be on the election result. The manufacturing number was projected to improve to 49.3 from the previous 48.9.

Services is normally the one to watch in the UK as it makes up for the highest percentage of GDP. This time Brexit and the general election result have taken all the limelight as sterling strength holds up across the board. IHS market said that this reading could have a negative effect on GDP.

The results for the UK general election were much better than Boris Johnson could have expected, and with a majority, he can now press ahead with his plans to 'get Brexit done' and this has lifted the Pound significantly as hopes rise for an end to the uncertainty which has hurt the UK economy after 3 and a half years of political stalemate.  

Avoiding another hung parliament was, therefore, a big boost for GBP, and as we saw last week, as soon as the markets received the exit polls showing a large win for the Conservatives, Cable rallied hard and took out our modest 1.3400 target with ease.  However, 1.3500 was a stretch, and this was duly faded as we still needed to see a Brexit vote passed in order to get the withdrawal schedule for January over the line.  We are likely to see GBP trading sideways in the meantime, but raised hopes through a strong majority will keep the Pound elevated for now.  

Going forward, we must remember that this is effectively only stage one of the Brexit process and we still have main trade talks to contend with over the coming year, if not longer.  On this basis, we can expect any further GBP gains to be a little more measured, with the EU already warning Boris Johnson over tough trade talks going forward.  


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