Markit’s manufacturing purchasing managers’ index for the UK came out slightly below expectations at 56.7 points. It was expected to remain almost unchanged in January, after scoring 57.2 points in December (revised down from 57.3), reflecting strong growth. The 50 point mark separates growth from contraction.
The pound was falling towards the release, with GBP/USD down to 1.6375 just before the publication. Sterling also dropped against the euro.
Economic growth remains strong in the UK according to the recent growth figures. However, a lot of this growth has already been priced in. In addition, the message that interest rates will remain low despite the drop in the unemployment rate are beginning to be heard by markets.
The unemployment rate dropped to 7.1% in November, very close to the Bank’s target of 7% – the threshold for possibly raising the rates. Nevertheless, with low inflation, Carney and co. can certainly keep rates at low levels for a longer time.
For more on the pound, see the GBPUSD forecast.