Sterling may finish on the wrong side of currency traders after UK manufacturing PMI dimmed hopes that Britain’s economy would maintain its third-quarter rebound. The pound opens lower against the US dollar and below one-month highs on a trade-weighted basis and local construction PMI data is likely to add further pressure.

The euro is now trading close to three-week lows against the US dollar and may have breached those levels had it not been for some robust US and Chinese economic data that helped lift stock markets and encourage some risk taking. Revised manufacturing PMI surveys from Europe were released and should keep the euro busy while the pound will face construction data before US elections.

Sterling

The downturn in Britain’s manufacturing industry deepened in October according to the latest CBI PMI survey published. October’s manufacturing PMI reading fell more than expected from the prior 48.4 to 47.5, moving further below the 50-mark that divides growth from contraction. This has pushed the pound sharply below the one-month trade-weighted high that it had reached on the back of robust UK retail sales data which suggested the economy would maintain its rebound.

US dollar

The US dollar gained despite stronger-than-expected US economic data and higher stocks which usually increase appetite for risk and weaken the US currency’s safety allure. ISM reported a gain in US manufacturing activity in October while consumer confidence surged to over four-year highs in the same month. Adding to signs that the world’s biggest economy was growing again, weekly jobless claims data and ADP’s employment survey both beat estimates

Euro

The euro is now hovering just above three-week lows against the US dollar after another fall, and may continue to slide as the threat of Greece leaving the euro resurfaces again. The International Monetary Fund confirmed that Athens is still dealing with financing issues, which means Greek debt risks could become a serious fear for investors again. Greece requires a significant slice of its bailout money to be unlocked soon in order to meet debt obligations. The euro will also face the release of revised PMI data from Europe. The surveys will probably act as a repeat warning for the market that until the euro zone can deal with government debt problems effectively, the 17-nation economy may continue to shrink.

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