The single currency remained under pressure on Monday as the Eurozone’s manufacturing PMI contracted for the tenth consecutive month, although the data did suggest the worst may be over. While November’s PMI figure was below the 50 mark separating growth from contraction, manufacturing in the bloc contracted at the slowest rate for three months.
Added to this, business confidence in the Eurozone improved, hitting a five-month high with sentiment recovering from August’s near seven-year low, which limited euro losses.
Commenting on the bloc’s manufacturing PMI, chief business economist at Markit, Chris Williamson said: “A further steep drop in manufacturing output in November means the goods-producing sector is likely to have acted as a major drag on the Eurozone economy again in the closing quarter of 2019.
“Although still signalling a steep rate of decline, the manufacturing PMI nonetheless brings some encouraging signals which will fuel speculation that the worst is over for Euro area producers, barring any new set-backs (notably in relation to Brexit and trade wars).”
Meanwhile, the pressure of a global trade slowdown and political uncertainty in the UK caused the UK’s manufacturing sector to continue to decline.
While this was a smaller decline than expected from earlier flash data, Sterling was left flat as this was the sector’s longest decline since the global financial crisis.
Manufacturing employment fell for the eighth consecutive month in November and the pace of job cuts was the steepest since September 2012.
Commenting on this morning’s data, Markit director, Rob Dobson noted: “November saw UK manufacturers squeezed between a rock and hard place, as the uncertainty created by a further delay to Brexit was accompanied by growing paralysis ahead of the forthcoming general election.
“Manufacturers across all sectors will be hoping that the New Year brings clarity on the political, trade and economic fronts, providing a more certain foundation to plan and rebuild as the next decade begins.”
Looking ahead, the pound could suffer further losses if Tuesday’s construction PMI is hit by election and Brexit pessimism as today’s manufacturing data has been.
If UK construction is pushed further into contraction in November GBP/EUR could slump.