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Pound Falls As UK Manufacturing Activity Contracts Amid "Brexit" Concerns

06:01, 3rd May 2016

(RTTNews) - The pound declined against the other major currencies in European deals on Tuesday, as the U.K. factory activity shrank unexpectedly in April, for the first time in three years, signaling that the manufacturing sector entered the second quarter on a poor footing amid "Brexit" fears.

The Chartered Institute of Procurement & Supply Purchasing Managers' Index for the manufacturing sector fell unexpectedly to 49.2 in April from a revised 50.7 in March, according to a survey from Markit.

The measure was forecast to rise to 51.2 from March's originally estimated value of 51. The reading fell below the critical no-change mark of 50.0 for the first time since March 2013.

The currency was also weighed by falling European shares, as the yen's continued strength, a firmer euro and weak manufacturing data out of China sapped investors' appetite for risk.

The Caixin Manufacturing Purchasing Managers' Index contracted further in April, with a PMI score of 49.4. This is down from 49.7 in March and missed forecasts for 49.8.

The pound showed mixed performance in Asian deals. While the currency rose against the greenback and the franc, it declined against the yen. Against the euro, it held steady.

Reversing from an early high of 156.15 against the yen, the pound declined to more than a 2-week low of 154.69. On the downside, 152.00 is likely seen as the next support level for the pound.

The pound, having advanced to a 4-month high of 1.4770 against the dollar at 4:00 am ET, fell to 1.4597. The pound is seen finding support around the 1.44 mark.

The pound weakened to near a 2-week low of 1.3869 against the Swiss franc, following an advance to 1.4041 at 2:25 am ET. Further weakness may take the pound to a support around the 1.36 region.

Survey results from the State Secretariat for Economic Affairs showed that Swiss consumer confidence eased slightly in April.

The consumer sentiment index fell marginally to -15 in April from -14 in January. It was forecast to improve to -12.

The pound slid to 0.7912 against the European currency, its lowest since April 20, off its prior high of 0.7842. Continuation of the pound's downtrend may see it finding support around the 0.80 area.

Data from Eurostat showed that Eurozone producer prices continued to decline in March but the pace of decrease was slower than expected.

Producer prices fell 4.2 percent year-on-year in March, the same pace of decline as seen in February. Prices were expected drop 4.6 percent.

Looking ahead, at 10:30 am ET, Federal Reserve Bank of Cleveland President Loretta Mester speaks in a panel discussion titled "Unconventional wisdom: How will unusual monetary policy affect market liquidity" at the Atlanta Federal Reserve's Annual Financial Markets Conference, in Amelia Island.

The Bank of Canada Governor Stephen Poloz speaks in a panel discussion at the Milken Institute's Global Conference in Los Angeles at 12:30 pm ET.

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