Sterling has continued to rapidly tumble following the release of weak UK manufacturing PMI data for April and yet another defeat for the government in a Brexit-related vote in the House of Lords. The GBP/USD cross fell to 1.364, the low since 11th January, while GBP/EUR is down to 1.135 – the low since mid-March
The PMI, a diffusion index which is more forward looking than the weak Q1 GDP data released last week, fell to 53.9 from 54.9 in March, with manufacturers pointing to slower growth of output, new orders and employment. While the manufacturing sector accounts for only 10% of the British economy, this latest number will accentuate concerns that underlying UK growth remains weak, irrespective of the (modest) negative effects of cold and wet weather. Focus will now turn to the services PMI due for release on Thursday but even a rebound from the 20-month low of 51.7 recorded in March may not materially move markets which are now pricing in only an 8% probability of a rate hike at the 10th May policy meeting.
