GBP and EURO Performance With The Release Of Eurozone And U.K. Manufacturing PMIs
GBP/USD kicked off Monday’s trading session on an uptick amid reports of a slower manufacturing PMI in Britain which was reported at 49.4. Accordingly, it is failing to hit analyst expectations.
The U.K. was not the only country to report a slower manufacturing PMI. The ISM Manufacturing PMI in the U.S. tanked to 52.1, thus failing to hit the 53.0 target. The sub-50 manufacturing PMI in Britain highlights the dull performance for British fundamentals and subsequently, the contracting situation rather than an expansion. This is the first time that the British Manufacturing PMI has contracted in the last three years.
The contracting manufacturing PMI did not have much of an impact on the GBP because the currency had a 3.1% which was in line with the 3.1% analyst estimate for April. The strong GBP performance is likely due to Britain’s strong economic performance regardless of the ongoing trade war between China and the U.S. the economic performance might also be tied to the calm in the Brexit storm that has prevailed over the U.K. for quite some time.
Euro remains stable despite a slight decline by the German manufacturing PMI’s, from 44.4 to 44.3 as per the latest release. The manufacturing industries in the Eurozone and Germany have been negatively affected by poor global demand.
This declining in global demand is believed to have been caused by the currently existing global trade tensions. The ongoing China-U.S. trade war has slowed down the demand for German vehicles. The situation will likely get worse if the trade situation between China and the U.S. is not resolved soon.
The U.S. economy's performance
Although the U.S. is currently locked in a trade war with China, its economy continues to demonstrate positive performance. The economy managed to grow past the 3% level within the first quarter of 2019, with its GDP matching the 3.1% second estimate gain. It was still slightly lower than the initial estimate announced in April.
There has, however, been some concerns about the likelihood of the economy taking a hit from the prolonged trade standoff. For example, there have been fears of adjusted interest rates as well as concerns that the trade situation will force traders to adopt a cautious approach. Less trade would impact the dollar's performance, thus hurting the economy.
U.S. government remains confident about a deal with China
The U.S. and China have been deliberating for quite some time now, and a viable trade deal has not materialized, and neither of the two parties is willing to bow down to the pressure. This has only led to further concerns about the impact on the U.S. economy. The U.S. President Donald Trump and other government officials are, however, confident about the negotiations.
POTUS recently announced that the two parties have so far made noteworthy progress and that a deal is very imminent. However, that was before he imposed more tariffs against China and the Asian country decided to retaliate by imposing tariffs on the U.S.
Although talks are still ongoing, there is no denying that things are really on edge and it's only a matter of time until the economies start feeling the weight of the trade war.