U.K. manufacturing rebounds in July, BoE likely to hike rate next week

The CBI Industrial Trends Survey showed that U.K. manufacturers enjoyed some respite in July, after losing momentum earlier in the year. The official figures showed that output came in at 1.2 percent three-month-on-three-month in May. The reported output balance came in at 27 percent in the three months to July, showed the extended quarterly report, a considerable rebound on the previous quarter’s 15 percent.

The CBI showed that a rebound in domestic orders which more than compensated for an easing of export orders. The latter might be indicative of that the effect of Brexit uncertainty over future trading arrangements might already be having on U.K. manufacturers, and their role in EU supply chains.

This survey indicated both weak investment intentions, in spite of a recent rise in capacity pressures, and unchanged confidence – with optimism over export prospects in particularly suffering. The latter balance, looking at exports over the next three months, dropped to 10 percent from 21 percent in the earlier quarter, with rising trade tensions also clearly being a drag on the mood. The expectations are for orders to decelerate again in the next three months, implying that the recovery in growth might not be sustained, and that the sector continues to be comparatively fragile. But for the moment, a reported acceleration in skills shortages, unit wage costs and domestic prices add weight to expectations of a Bank Rate rise next week, stated Daiwa Capital Market Research in a report.

At 21:00 GMT the FxWirePro's Hourly Strength Index of British Pound was neutral at 31.227, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -77.4837. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex