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Strong UK manufacturing figures give pound boost.

01.04.10

By What Investment
 
Data released this morning showed a rise to 57.2 in the UKs Manufacturing Purchasing Managers Index (PMI) in March, alleviating fears that the economy may have slipped back into negative growth.

The figure confirms that the sector is continuing to expand and bettered forecasts, which had called for a more modest increase to 56.8, from February's reading of 56.6. This improvement in the UK manufacturing sector follows both Germany and the eurozones stronger reading in their March PMI readings. All three economies posted their best numbers since the beginning of the recession.

Expansion in the sector comes off the back of a rebound in both consumer demand and export sales. Duncan Higgins, senior analyst at Caxton FX said, 'Sterlings recent weakness is beginning to translate into some positive economic figures. To see this rate of expansion in the manufacturing sector is certainly encouraging for Britains economic prospects. The data should help alleviate fears that the economy may have slipped back into negative growth in the first quarter of this year.'

The pound benefitted from this positive data, but has hit resistance levels against both the euro and the US dollar. Higgins added, 'Although sterling has got a boost from the figures, it is struggling to push higher. Investors are still wary that the weekend may reveal a raft of polls pointing to a non-majority government.

In addition, price movements have been exaggerated this week in thin liquidity and we could see sterling slip back below 1.12 and $1.50 in the short term.'

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