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The CBI monthly manufacturing order book balance for May dropped to -41, following the -38 reading in April. That marks the lowest such estimate since September 2020 amid surging cost pressures. Of note, the gauge of expected selling prices rose to +38 (previously +32) – marking the highest since February 2023.While the UK PMI data report earlier showed that manufacturing conditions held up in May, it came with a big caveat. Most firms reported a temporary demand increase due to frontloading activity in order to beat price hikes and potential supply disruptions.As such, the CBI data above is a better signal of underlying conditions and the actual demand environment.”Against an uncertain global backdrop, the conflict in the Middle East is feeding through to higher energy costs and renewed supply chain disruption, adding another layer of challenges for manufacturers, who are already grappling with weak demand.”
This article was written by Justin Low at investinglive.com.
đź’ˇ DMK Insight
The drop in the CBI manufacturing order book balance to -41 signals a concerning trend for traders: This decline, the lowest since September 2020, indicates that manufacturers are facing significant cost pressures, which could lead to reduced production and lower economic growth. The rise in expected selling prices to +38 suggests that companies are anticipating higher costs, which could squeeze margins and impact profitability. For traders, this data is crucial as it may influence central bank policies and market sentiment. If manufacturing continues to falter, we could see a shift in monetary policy, potentially affecting currency pairs like GBP/USD. Keep an eye on the upcoming economic reports and how they correlate with these manufacturing trends. A sustained negative balance could lead to increased volatility in the forex markets, particularly if the Bank of England reacts to these pressures. Watch for key levels in GBP/USD around recent support and resistance points, as a break could signal further downside risk.
đź“® Takeaway
Monitor GBP/USD closely; a sustained negative manufacturing outlook could trigger volatility and impact central bank policy decisions.
