24/09/2020

UK economic recovery slows


GBP

Sterling held its ground against both the euro and dollar yesterday despite the latest UK PMI data indicating that the economic recovery lost momentum in September.

According to the data released by the Office for National Statistics, the UK Manufacturing index declined from 55.2 previous to read 54.3.

The services sector also experienced a slow down as services fell to 55.1 from 58.8 previous. The data showed new business volumes increased at their lowest rate for three months with business confidence declining to three month lows. Companies are citing Brexit and coronavirus concerns.

It must be noted that although the latest PMI figures are slightly lower than the month previous, the data still represents an expansion which is good news for the economy and Q3 GDP. However, the current Brexit impasse, re-introduction of tighter lockdown restrictions and the end of the government’s job retention scheme, all represent downside risks for Q4.

Cautious optimism surrounding Brexit talks provided some support for sterling yesterday, following the news European Union Chief Negotiator Michel Barnier has headed to London for informal talks to prepare for next week’s negotiating round.

According to reports, Barnier is eager to strike a trade deal, with a Brussels source claiming that Boris Johnson’s threat to rip up the Withdrawal Agreement had created a “more open atmosphere” in talks between UK and EU counterparts. UK minister Michael Gove struck an optimistic tone adding that he is confident Britain can overcome its difficulties to secure a free trade deal with the EU.


Key announcements

  • 12:30 – GBP – Chancellor Rishi Sunak’s Winter Economy Plan
  • 15:00 – USD – Fed Chair Powell testifies
  • 15:00 – USD – Treasury Sec Mnuchin speech
  • 15:00 – GBP – BoE Governor Bailey speech

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