Forex News: Pound Slides On Weak UK PMI Data

Pound Slides On Weak UK PMI Data

(RTTNews) - The British pound weakened against other major currencies in the European session on Wednesday, after the U.K. private sector activity deteriorated for the first time in one-and-a-half years in April amid weaker foreign demand linked to tariff uncertainty.

Data from S&P Global showed that the U.K. flash composite output index dropped to a 29-month low of 48.2 in April from 51.5 in March. The expected score was 50.4. Any reading below 50 indicates contraction in the sector.

Weaker demand from international markets weighed on business activity in both the manufacturing and service sectors, the survey said.

The services Purchasing Managers' Index also fell to a 27-month low of 48.9 compared to 52.5 in March. The score was well below the forecast of 51.5.

At 44.0, the manufacturing PMI remained at a 20-month low as expected and down from 45.3 in March.

Traders speculate that the Bank of England (BoE) could reduce interest rates in the May policy meeting. The slower-than-expected growth in the Consumer Price Index (CPI) figures for March and the uncertainty surrounding the global economic outlook have given traders more confidence that interest rates will be lowered next month.

Meanwhile, European stocks traded higher after U.S. President Donald Trump toned down his rhetoric on Jerome Powell, saying he would like to see him be a little more active in terms of his idea to lower interest rates but have no intention to fire him.

Additionally, Trump also admitted that the 145 percent tariffs on China are "very high" and they will come down substantially.

In economic news, data from the Office for National Statistics showed that the U.K. budget deficit far exceeded the government estimates in the fiscal year ended March. Public sector net borrowing in the financial year ending March rose by GBP 20.7 billion to GBP 151.9 billion.

This was the third highest borrowing on record since 1947 and also stood above the GBP 137.3 billion forecast by the Office for Budget Responsibility in March.

In March alone, public sector net borrowing was GBP 16.4 billion, which was above economists' forecast of GBP 15.4 billion.

In the European trading today, the pound fell to 1.3283 against the U.S. dollar, 188.26 against the yen and 1.0915 against the Swiss franc, from early highs of 1.3329, 189.06 and 1.0968, respectively. If the pound extends its downtrend, it is likely to find support around 1.31 against the greenback, 190.00 against the yen and 1.14 against the franc.

Against the euro, the pound edged down to 0.8579 from an early 1-week high of 0.8544. The pound may test support near the 0.87 region.

Looking ahead, U.S. MBA mortgage approvals data, Canada new housing price index for March, U.S. S&P Global PMI data for April, new house sales data for March, U.S. EIA crude oil data and U.S. Fed Beige book data are set to be published in the New York session.

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