UK PMI results were below the pessimistic market expectations - BBH

Research Team at BBH, notes that in what Markit said would be a one-off, a flash PMI reading for the UK was made available, which includes about 70% of the responses and the news was not pleasant.  

Key Quotes

“The results were below the pessimistic market expectations.  Two MPC members (Weale and Forbes) wanted to see more real sector data before agreeing to ease policy.  While the PMI is survey data, the magnitude of the decline may underpin expectations of BOE action in a couple of weeks.  The implied yield of the September short-sterling future has fallen three basis points today, which is sufficient to negate the week's increase.

Specifically, the UK flash manufacturing reading fell to 49.1 from 52.1.  The Bloomberg median guesstimate was 48.7.  The flash service PMI fell to 47.4 from 52.3.  The Bloomberg median forecast was 48.8.  These results led to the composite falling to 47.7 from 52.4.

Sterling was trading a little above yesterday’s high and just below $1.33 when the news hit.  Sterling was sold off and briefly and shallowly traded below $1.3150.  It has traded on both sides of yesterday’s range.  A close below yesterday’s low (~$1.3156 according to Bloomberg) would be a bearish technical development.  That said, good buying interest was detected earlier this week as the $1.30 level was approached.”