UK: PMI for manufacturing held a pleasant surprise - BBH

After Nationwide reported that UK house prices rose 2.2% in February from a year ago, down from 1 3.2% pace in January, the Markit PMI for manufacturing held a pleasant surprise, points out the research team at BBH.  

Key Quotes

“It did not rise but it held in better than expected at 55.2 down from 55.3.  Still, it is the third consecutive decline and compares with the 56.9 average in Q4 17 and 55.9 average for all last year.  The December 2018 short-sterling futures implies a 1.3% yield.  This is an eight basis point decline from the peak at the start of the week, but sterling's chief challenge stems from the US dollar's recovery and Brexit.”

“May’s speech tomorrow may have lost some of its thunder after ten Tory MPs reportedly will support an opposition amendment to a trade bill requiring the UK to stay in a customs union with the EU.  This is the exact opposite of what the UK's cabinet has supported.  The EU's draft treaty was really a worse case agreement, seemingly purposeful to provide additional pressure.  As we have written about previously, the significance of the Irish border issue should not be underestimated in the negotiations.”

“Sterling closed below a trend line from the mid-November lows, and below the 50-day moving average for the first in three months.  It has not been able to resurface above the trend line today (~$1.3175).  Note that the $1.3700 area houses the 50% retracement of sterling's gains since those mid-November lows.  A break of this area could target $1.3550-$1.3600.”