Pound hit by double whammy of Boris’s Brexit broadside and manufacturing weakness


The pound was hit by a double whammy of bad news today as weak manufacturing data compounded the currency’s negative reaction to the Boris Johnson Brexit tirade in today’s papers.

Sterling had recovered a bit of ground last week after months of steady erosion by uncertainty over what kind of Brexit the May Government will able to negotiate.

But the Brexit row among the Tories flared up again today as former foreign secretary Mr Johnson lambasted the prime minister for her Chequers compromise and ‘going into battle with Brussels with a white flag raised’.

The latest data suggests investors are ramping up their short positions on the British currency, with more bets against the pound than at any time since May 2017. 

The latest data suggests investors are ramping up their short positions on the British currency, with more bets against the pound than at any time since May 2017. 

The latest data suggests investors are ramping up their short positions on the British currency, with more bets against the pound than at any time since May 2017. 

That sapped confidence in sterling and was followed by data showing that output from Britain’s manufacturing sector fell to its lowest level in more than two years in August. 

The Markit/CIPS UK Manufacturing purchasing managers’ index showed a reading of 52.8 last month, down 53.8 in July and well below economist expectations of 54.

Worrying, the slump was down to a collapse in overseas demand for UK exports. 

Having started the day about €1.116, the disappointing news on the UK economy saw the pound fall against the euro to €1.109. Against the dollar, sterling fell from $1.296 to $1.288.

The pound has become more sensitive to the progress of Brexit negotiations as critics at home and officials in Brussels have stepped up their opposition to Mrs May’s plans for how to leave the European Union.

‘With Brexit negotiations between the UK and the EU in full swing, the potential “cliff” of a hard-Brexit has come more clearly into focus,’ UBS strategists said in a note estimating the total cost of Brexit as 2 per cent of GDP.

The Brexit row and disappointing news on the UK economy caused the pound to give up the meagre gains it made last week against the euro.

The Brexit row and disappointing news on the UK economy caused the pound to give up the meagre gains it made last week against the euro.

The Brexit row and disappointing news on the UK economy caused the pound to give up the meagre gains it made last week against the euro.

Likewise having nudged back above 1.30 against the dollar last week, sterling today retreated back towards the 1.28 mark.

Likewise having nudged back above 1.30 against the dollar last week, sterling today retreated back towards the 1.28 mark.

Likewise having nudged back above 1.30 against the dollar last week, sterling today retreated back towards the 1.28 mark.

The latest data suggests investors are ramping up their short positions on the British currency, with more bets against the pound than at any time since May 2017.

The EU’s Barnier told a German newspaper on Sunday that he strongly opposed Britain’s latest proposal.

‘If we let the British pick the raisins out of our rules, that would have serious consequences. Then all sorts of other third countries could insist that we offer them the same benefits. That would be the end of the single market and the European project,’ he said.

The pound has become more sensitive to the progress of Brexit negotiations as critics at home, like Boris Johnson (left), and officials in Brussels have stepped up their opposition to Mrs May’s plans for how to leave the European Union.

The pound has become more sensitive to the progress of Brexit negotiations as critics at home, like Boris Johnson (left), and officials in Brussels have stepped up their opposition to Mrs May’s plans for how to leave the European Union.

The pound has become more sensitive to the progress of Brexit negotiations as critics at home, like Boris Johnson (left), and officials in Brussels have stepped up their opposition to Mrs May’s plans for how to leave the European Union.

The manufacturing PMI figure represents a 25-month low and comes alongside job creation slowing to ‘near-stagnation’ in the sector, and business optimism crashing to a 22-month low.

Rob Dobson, director at IHS Markit, which compiles the survey, said: ‘The performance of the UK manufacturing sector looked increasingly lacklustre in August.

‘The headline PMI fell to its lowest level for over two years, as growth of output and new orders slowed and the pace of job creation slumped to near stagnation.’

The main cause behind the fall was foreign demand decreasing for the first time since April 2016, despite the continued weakness of the pound, which had been helping prop up the sector.

Some firms linked lower inflows of new work from abroad to the recent weaker pace of expansion of the world economy.

There was also softer domestic demand dragging on the sector.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: ‘With a subdued global economy threatened by escalating trade wars and Brexit uncertainty making its mark, it’s unclear where future opportunities to sustain the health of the sector will come from.’

Just 47 per cent of firms still expect output to be higher in one year’s time, according to the survey

Mr Dobson added: ‘Based on its historical relationship with official ONS data, the latest PMI report is broadly consistent with zero growth in manufacturing production, meaning the sector will likely fail to provide any support to the wider UK economy in the third quarter.’



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