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Big Year Ahead For Sterling

Happy New Year!

UK manufacturers saw confidence levels reach a 30-month high as output and new orders strengthened.

The manufacturing purchasing managers’ index (PMI) rose to 56.1 in December, up from 53.6 in November, as the sector ended the year on a high.

The pound rose sharply against the euro this morning as the data was released, reaching highs of €1.1822. The pound also rose against the dollar, regaining all losses in early morning trading.

The PMI reading means UK manufacturing confidence remains well above the long-run average of 51.5. Any reading above 50 indicates net positive sentiment.

Production and new order growth reached their respective high points for two and a half years as demand from the UK and abroad both increased.
Manufacturers’ morale was severely hit by the June vote to leave the European Union, but has since increased as predictions of short-term economic chaos were not proven accurate.

However, consumer inflation is expected to rise sharply this year, as devalued sterling feeds through on higher input costs. The producer price index, which measures factory gate prices, rose by 2.3 per cent in November, which will almost certainly feed through to consumer prices.

A big few months ahead for Sterling which will be driven by talks of triggering Article50 and starting the process of exiting Europe. We expect this to be a very volatile period for the pound value. Speak to a member of our team to protect yourself from market fluctuations.

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