The Markit purchasing managers’ index for Britain’s manufacturing sector squeaked into the growth zone at 50.1, matching expectations. On a scale of 0-100 where 50 means stagnation, 50.1 was hardly a stonking result, but it was a technical win and enough to allow sterling to move higher.
On its own the manufacturing PMI would not have been enough to boost the pound. After three months of contraction it will need more than 50.1 to get the manufacturing sector back on the road to worthwhile growth. However, investors decided yesterday morning that there were reasons to be cheerful, if only because they were fed up with being glum about the pound. The media went to some effort to justify the firmer pound with talk of a Brexit deal and technical factors. Nevertheless, it looked very much as though people were buying it because it was going up.
They took a similar line with the Norwegian krone. It, too strengthened on the back of nothing. Oil prices were unchanged on the day and there were no domestic data to warrant it. The krone ended up 0.3% ahead of the pound. Sterling strengthened by an average of 0.7%, adding two thirds of a euro cent and one and a third US cents.
The other PMIs on Wednesday also tended to be higher on the month. Only a couple fell short of forecast. Switzerland’s 41.9 was the biggest disappointment, lower on the month and shy of expectations.
Not that the shaky PMI did the Swiss franc any harm: it was steady against its safe-haven partner, the Japanese yen, and 0.2% higher against the US dollar. The Euroland PMIs ranged between Germany’s 45.2 and France’s 52.3. Only France and Ireland came in above 50. The US readings from Markit and ISM were 49.8 and 52.6.
Rounding out Wednesday’s agenda the Federal Open Market Committee published the minutes of its policy deliberations last month. They contained nothing surprising or controversial. Yield curve management might be worth a look and there is little chance of negative rates. The committee concurred that it should provide more explicit forward guidance on rates.
Because 4th July falls on Saturday, and because that is when the USA celebrates its national day, America will be taking Friday off. It means that, unusually, the important US employment report will come out today, on a Thursday. Analysts expect nonfarm payrolls to have increased by 3 million.
After shrinking by 21.5 million jobs in March and April, payrolls went up by 2.5 million in May. A 3 million increase in June would still leave a 16 million gap that will not quickly or easily be filled. Unemployment is forecast to have fallen by a percentage point to 12.3%. The weekly jobless claims numbers also come out today, as does the monthly euro zone unemployment figure and the delayed manufacturing PMI from Canada.
America’s absence makes for a shortened agenda on Friday, which will be taken up mainly by the services PMIs from the Far East and Europe. Britain’s reading is predicted to be 47, a touch lower than the one from pan-Euroland.