The weak PMI report will increase pressure for a more aggressive Bank of England monetary policy.
Sterling found support below 1.9840 against the dollar on Thursday and pushed higher over the day. The UK currency again hit tough resistance in the 1.9940 region and settled close to 1.99. Sterling found support close to 0.7480 against the Euro on Thursday and edged stronger on Friday as ranges narrowed with a further attack on resistance levels above the 1.99 level against the dollar.
Consumer confidence edged stronger to -13 in January from -14, although this was still at historically depressed levels. The UK currency will gain some support if the economy appears resilient, especially as North America and European growth fears have increased.
The PMI report for the manufacturing sector fell to 50.6 in January from 52.9 the previous month which will increase fears over the UK economy and will increase pressure for a 0.50% Bank of England rate cut next week, but the immediate Sterling reaction should be limited.