December 19, 2022
Daily Report 19/12/2022
Sterling remained under pressure after Friday’s European open with lows against the dollar amid fears over the domestic and global economy. According to flash data, the UK PMI manufacturing index dipped to a 31-month low of 44.7 from 46.5 the previous month and below expectations of 46.5. in contrast, there was a recovery in the services sector to 50.0 from 48.8 and above expectations of 49.2. New orders continued to decline and employment declined for the first time since February 2021. There was an easing of cost pressures on the month with the slowest increase for 19 months while overall business confidence edged higher. The services-sector data provided an element of relief, although overall confidence surrounding the economy remained fragile. Risk conditions dominated later in the day with the UK hurt by a slide in confidence. CFTC data recorded a further small decline in short Sterling positions to just below 26,000 contracts from 28,000 the previous week and the smallest short position since March 2022, limiting the scope for further buying.
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French PMI data was mixed with weaker than expected data for services offset by a stronger than expected release for services. Both German releases beat expectations, although manufacturing and services remained in contraction territory. The overall Euro-Zone PMI manufacturing index edged higher to 47.8 for December from 47.1 and above consensus forecasts of 47.1. There was also a small net improvement to the services-sector index to 49.1 from 48.5 and above expectations of 48.5.
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The US PMI manufacturing index dipped further to a 31-month low of 46.2 for December from 47.7. The services-sector index also dipped to a 4-month low of 44.4 from 46.2 previously. New orders declined at the fastest rate since May 2020 with exports also declining. Overall business confidence remained weak with only a marginal employment improvement while the increase in output charges increased at the slowest rate for over two years. The data triggered fresh alarm over the US economy with equity markets moving lower while there was also more speculation that inflation pressures would retreat more quickly than expected.
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