The Pound weakened against most of the majors yesterday as markets reacted to some worse-than-anticipated UK manufacturing data. Markit Economics reported that factory output improved from a downwardly revised 51.8 to 52.0 in May but investors were disappointed because the median market consensus had pointed towards a higher score of 52.5.

Depressed private sector output threatens to give the Bank of England ammunition to keep rates at the current record low of 0.50% for longer and subsequently we could see Sterling soften over the next few days if data related to construction and, more decisively, the services industry also disappoint market forecasts.

Euro

Sterling failed to make any lasting gains against the Euro yesterday even though Greek debt talks took a turn for the worse because traders were unimpressed by Britain’s dud manufacturing PMI report.

Relations between the ruling Syriza party in Greece and the nation’s creditors are famously bad at the moment. Some would say the debt negotiation talks resemble the inharmonious sounds of a guitar with a couple of strings missing. And as if a two string deficit wasn’t enough, Greek PM Alexis Tsipras decided to snap another string yesterday morning by publishing an op-ed in the French newspaper ‘Le Monde’ admonishing the ‘insistence of certain institutional actors on submitting absurd proposals’.

Although the single currency did not weaken significantly following the publication of the Greek leader’s article, the abrasive language employed towards the very people he is negotiating with is unlikely to help the situation. Moreover, the choice words appear to create a heightened division between Greece and its creditors, as if preparing the Greek people for a possible Eurozone exit. If Tsipras decides that he can’t stand the tune of further institutional austerity any longer then it could spell the end for the Hellenic nation’s membership in the 19-nation bloc. The threat of contagion under these circumstances could seriously undermine confidence in the single currency.

US Dollar

The Pound to US Dollar exchange rate tumbled by a cent to a fresh three-week low yesterday as disappointing UK manufacturing data paved the way for another day of decline in ‘Cable’.

Whereas Sterling was negatively impacted by factory output data, the ‘Greenback’ benefitted from a report from the Institute of Supply Management (ISM) showing that rising new orders and a surge of job openings helped drive manufacturing output from 51.5 to a better-than-expected 52.8 in May.

GBP/USD is now around five cents lower than it was just two weeks ago, mainly due to increased expectations of a Federal Reserve rate hike by the end of the year, but also thanks to a slight slowdown in British data. The current market pricings suggest that the Fed will start raising rates in December of this year, whilst the Bank of England is not expected to start tightening monetary policy until around the midpoint of 2016.

Canadian Dollar

The Canadian Dollar was the only currency that Sterling managed to strengthen against yesterday as a slip-up in oil prices compromised demand for the commodity-correlated ‘Loonie’. Canadian manufacturing output printed disappointingly at 49.8 and this slowdown in factory orders also weighed on the Canadian Dollar.

Australian Dollar

Sterling lost ground to the Australian Dollar during the London session yesterday but the high-beta ‘Aussie’ was unable to register any significant gains due to jittery traders who were cautious ahead of the Reserve Bank of Australia’s interest rate decision early in the morning.

New Zealand Dollar

The underwhelming British manufacturing report helped drive GBP/NZD lower by around two cents yesterday. The Pound had been sitting at a four-year high but traders opted to lock-in profit from Sterling’s recent gains when the UK PMI report hit newswires.