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06/10/23
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GBP Ignores Soft Construction PMI
On Thursday the British pound edged higher and GBP/USD traded at about 1.2149, 0.09% up in the North American session.
In September the UK Construction PMI dropped from 50.8 in August to 45.0 and lower than the 49.9 consensus estimate. This was the first drop in 3 months and the steepest fall since May 2020.
The survey indicated that weak house purchase demand and high mortgage rates affected the construction industry negatively. Business expectations also dropped to the lowest level in the year.
The Construction PMI release presented more evidence that the Bank of England’s persistent tightening cycle has eased the economy. The Manufacturing and Services PMIs this week both indicated contraction in Sept., with readings lower than the 50 level.
Although the British currency didn’t change after the release of the Construction PMI, the pound is still falling toward the symbolic 1.20 level and the currency will likely experience further pressure if the next releases stay soft.
As inflation continues to decline, most major central banks are near the end of their rate-hiking cycle. The ECB, Bank of England, and Federal Reserve all started the rate hikes late and don’t want to declare prematurely that rate increases are over.
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