However, Sterling came under pressure today following the release of disappointing UK PMI data which revealed the index slumped to a 41-month low of 48.5. Added to this, a separate flash measurement for manufacturing revealed that output slumped to an 89-month low of 45.8. The weak data was attributed to a mix of Brexit and domestic political uncertainty, as well as weak global economic growth. Commenting on this morning’s data, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock noted: “The continuing Brexit-related aversion to investment and a pre-election lack of consumer confidence led to the fastest fall in business activity in December since July 2016.
“Any vestiges of hope are now pinned on the election results as the potential for reducing uncertainty may restore confidence in the months ahead. But the Brexit path is still littered with obstacles and the need for strong negotiation skills for a future EU agreement will be paramount to avoid this downward slide becoming the economic landscape for an extended period.”
Meanwhile, earlier this morning data revealed German private sector activity shrank for the fourth consecutive month, weighing on the single currency.
A downturn in manufacturing continued to offset any service sector gains, leaving the flash PMI at 49.4 in December.
While the bloc’s largest economy saw its service sector expand, rising to a four-month high, the manufacturing sector suffered a fast decline which dragged the headline figure lower.
Commenting on this morning’s data, Markit’s Principal Economist, Phil Smith noted: “With the headline composite PMI holding steady at 49.4 in December, the flash data point to a weak end to a difficult year for the German economy.
“The service sector remains resilient, with business activity rising at a stronger pace and business confidence perking up as well, though weak labour market trends are likely to be a restricting factor for the sector as we head into the New Year.”
Looking ahead to Tuesday, the pound could be left under pressure if Tuesday’s employment data reveals a decline in average earnings.