The Pound rallied yesterday after a senior British government official said Prime Minister Theresa May is preparing to make a significant new Brexit offer to the European Union in an attempt to open the door to a deal. Divorce talks are stuck on the question of how to avoid the need for police and customs checks on the border, but the British side now sees a path to reaching an agreement. Under the plan, which May is likely to put forward later this month, the UK would back down on its opposition to new checks on goods moving between the British mainland and Northern Ireland. In exchange, May’s team would need the EU to compromise and allow the whole of the UK including Northern Ireland to stay in the bloc’s customs regime.
In the morning session a survey from the Purchasing Managers’ Index showed a mild improvement and the headline figure came ahead of forecast, however the sector remained “lacklustre” in September as Brexit-related uncertainty continued to weigh on companies. Companies credited the rate of growth - which hit a four-month high - to a solid increase in new orders from domestic and export markets, a refresh of inventories and a renewed focus on clearing backlogs of work. Demand for UK exports felt a small recovery after contracting in August, with manufacturers experiencing more demand from the US, Europe, Russia, Scandinavia and Canada.
This short-term optimism follows figures from the Office for National Statistics which estimated last week that manufacturing, which accounts for around 10 per cent of the UK economy, contracted by 0.7 per cent in the second quarter.
The Institute for Supply Management (ISM) said activity in the US slowed in September as growth in new orders moderated sharply, but factories hired more workers, pointing to sustained strength in the sector. The ISM also noted that the nation's employment resource and supply chains continued to struggle. It said factories continued to be overwhelmingly concerned about tariff-related activity, including how reciprocal tariffs will impact company revenue.
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