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Fundamental Forex Analysis

UK Preliminary Manufacturing PMI slumps to 32.9 in April, GBP/USD unfazed

  • UK Manufacturing PMI hits record low of 32.9 in April.
  • Services PMI in the UK crashes to 12.3 in April.
  • GBP/USD keeps its recovery mode intact near 1.2350

The UK manufacturing and services sector activities showed a deeper contraction in April, the preliminary report from IHS Markit showed this Thursday. 

The seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) plunged to a record low of 32.9 in April versus 42.0 expected and 47.8 – March’s final reading.

Meanwhile, the Flash UK Services Business Activity Index for April also came in at a record low of 12.3 versus March’s final readout of 34.5 and 29.0 expected.

Chris Williamson, Chief Business Economist at IHS Markit, commented on the survey

“The UK economy has been hit by the COVID-19 outbreak in April to a degree far surpassing anything seen in the PMI survey’s 22-year history. Business closures and social distancing measures have caused business activity to collapse at a rate vastly exceeding that seen even during the global financial crisis, confirming fears that GDP will slump to a degree previously thought unimaginable in the second quarter due to measures taken to contain the spread of the virus. “Simple historical comparisons of the PMI with GDP indicate that the April survey reading is consistent with GDP falling at a quarterly rate of approximately 7%. The actual decline in GDP could be even greater, in part because the PMI excludes the vast majority of the selfemployed and the retail sector, which have been especially hard-hit by the COVID-19 containment measures.”

“Record falls in output across both manufacturing and services are being accompanied by job losses on an unprecedented scale, even if furloughed workers are excluded. Pricing power has also collapsed alongside the slump in demand, leading to the largest drop in average prices charged for goods and services ever recorded by the survey.”

FX implications

The slump in the UK Preliminary Manufacturing and Services PMI did little to keep the GBP bulls at bay, as GBP/USD kept its recovery mode intact around 1.2340. The terrible data were already priced-in by the markets.  

GBP/USD technical level to watch

 

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