The British pound sterling is rallying on Tuesday despite mixed economic data. The pound continues to rebound after falling to its lowest level against the US dollar in more than three decades. The national economy is expected to take a huge hit in the coming weeks as Prime Minister Boris Johnson ordered a nationwide lockdown that closes all non-essential businesses and services.
The IHS Markit manufacturing purchasing managers’ index (PMI) slumped to 48 this month, down from 51.7 in February – anything below 50 indicates a contraction. This is the sharpest output decline since July 2012, but the reading did beat market forecasts of 45. The report also pointed out a massive supply shock as factories have shut down around the world in response to the coronavirus pandemic.
The services PMI fell to 35.7 in March, down from 53.2 in the previous month. The composite PMI came in at 37.1 this month, down from 53 in February. Both readings fell short of median estimates.
The Confederation of British Industry’s (CBI) total order book balance slipped to -29 this month, down from -18 a month ago. But it was better than the market estimate of -35. The forecast for manufacturing expectations for the next three months tumbled 28 points to -20, which is the worst projection since the 2008 financial crisis.
Prime Minister Johnson announced extensive lockdown measures on Monday, and the mandates are scheduled to last until early to the middle of April. Despite its effects on one of the world’s largest economies, investors have been generally pleased by the news, considering how the situation is deteriorating in several countries and new hotspots are arising. Overall, analysts do predict the pound to recover most of its losses in the coming months.
Late last week, the Bank of England (BoE) slashed interest rates to 0.1% and ramped up its quantitative easing stimulus package to $233 billion. The central bank plans to buy government and corporate bonds as part of efforts to pump liquidity into the system and decrease the cost of borrowing.
The GBP/USD currency pair climbed 1.67% to 1.1736, from an opening of 1.1544, at 19:41 GMT on Tuesday. The GBP/EUR surged 1.4% to 1.0915, from an opening of 1.0761.