UK: Disappointing PMI numbers – BBH

The UK's manufacturing PMI disappointed yesterday (55.9 vs. 56.9 in August) and today it was the construction PMI as the 48.1 reading (from 51.1) is the lowest since last July and below the 50 boom/bust level, notes the analysis team at BBH.  

Key Quotes

“Sterling was sold on the news.  It is lower for the third session and seven of the past eight.  It broke through the 38.2% retracement of the advance since the late August low near $1.2775 yesterday (~$1.3320) and approached the 50% retracement (~$1.3215) today.  The five-day moving average is breaking below the 20-day average for the first time in a little more than a month.”

“The service PMI that will be released tomorrow covers the largest part of the economy.  Another disappointing report could see sterling move toward the 6.18% retracement level, which is found near $1.3110.  Meanwhile, the Tory Party Conference continues and so far there haven't been any fireworks.  However, Johnson appears to be trying to separate himself from May, but each time he is called out, he returns to the fold, until the next time.  Still, at this juncture, if Johnson resigns or is dismissed, sterling would likely to react positively.  To be sure, this is not a prediction of Johnson's departure, but rather simply the conclusion of thinking through the scenario.”