The manufacturing purchasing managers index which accounts for around 10% of the UK’s economy, released yesterday morning missed expectations only rising to 52.0 for May. This was up on the previously revised 51.8 in April, but still came in under market forecast of 52.8 showing growth is at a slower pace than expected. This added to belief that the Bank of England is more likely to keep interest rates lower for longer, as the broad rebound of the economic recovery in the UK for the second quarter is still in question. As a result the Pound fell to a three week low against the greenback, erasing gains made since the end of the elections.
Germany, the powerhouse of Europe, saw the release of the monthly CPI figure which came out at 0.1% an increase slightly above the flat figure seen last time of 0%. Manufacturing was also posted by Germany and shortly after from the Eurozone as a whole; with both figures out almost in line with expectations and signaling a modest acceleration in May.
The Dollar found more support as positive data came out of the U.S. yesterday afternoon. ISM manufacturing PMI was the headline figure from the US as it increased to 52.8, above the forecast of 51.9, proving that orders in May had grown at the fastest pace in five months. As orders have picked up up to their strongest reading since November, this points to production gains and a possible bounce back of the economy from the shrinking first quarter.
It has emerged this morning that there was an emergency meeting held in Berlin, hosted by German chancellor Angela Merkel. The hastily called gathering included Christine Lagarde, and the head of the ECB Mario Draghi comes as mounting uncertainty about Greece’s capacity to be able to keep paying its bills, and the pressure of releasing the much needed €7.2 billion to Athens, so that a default is avoided and a Grexit from happening. With no deal between Greece and its creditors being agreed anytime soon, the meeting last night had officials insisting that if a compromise is reached in Berlin, that it would not be an ultimatum for Athens but an outline to be presented to Greece for a quick resolution.
Today’s main focus will be set on the European markets. The unemployment data from Spain and Germany is due along with the regions key inflation reading. Meanwhile from the UK we will keep a keen eye on the PMI construction activity as we enter the summer.