Sterling Hoping for a PMI Boost

The weak sterling hopes for a PMI boost, Chinese PMIs and Japanese Tankan disappoint, euro PMIs could prompt profit-taking, US ISM and Michigan confidence.

If ever a currency needed a boost the pound needs one right now having hit its lowest levels against a basket of currencies since the general election in May 2010. While the single currency has ripped higher the pound has been hit by disappointing data virtually every day this week. Todays manufacturing PMI data for June could give the beleaguered pound a nice boost to take into the weekend.

The manufacturing PMI has been one of the more robust data items over the past few months, however it has slipped back somewhat from some of the impressive figures it was putting in earlier this year, when it was posting figures above 60. Expectations are for a slight increase from Mays 52.1 number to 52.3. Any number below that would reinforce fears that the UK economy was starting to grind to a crawl.

About half an hour before that, the focus will still be on Europe and it will make a pleasant change not to have to focus on Greece and instead look German and Euro zone manufacturing PMI data which will give some indication as to whether or not Europes economy is starting to slow down as well. Yesterdays dreadful retail sales figures in Germany have raised fears that consumers in Europes biggest economy are starting to rein in their spending in light of wider concerns with respect to the German economy which could be showing signs of slowing. German PMI for June is expected to stay at 54.9, unchanged from the previous month, while euro zone PMI is expected to come in at 52.

Continuing with the manufacturing PMI theme Chinese data for June continued to show weakness with the official PMI data for June slipping back to 50.9, its lowest levels since February 2009 and well below expectations of 51.5 and down from Mays 52, showing that the recent monetary tightening is beginning to have an effect. The equivalent HSBC PMI measure only just crept into expansion territory at 50.1., prompting fears that Chinese manufacturing could be on the brink of contracting, and easing fears of further monetary tightening in the near term.

Japans Tankan survey which measures business sentiment amongst manufacturers showed a marked deterioration for the last quarter, with the large manufacturers index dropping to -9 from +6. All other measures also disappointed with the only positive being the large all industry capex which came in at 4.2%, above expectations of 2.3%.

Later in the afternoon the latest manufacturing ISM numbers for June are scheduled for release and given the expiry of QE2, markets will be hoping that after the recent declines in manufacturing activity that there is a summer pick-up ahead of the long 4th July weekend.