Pound sterling remains on the defensive as the first major economic release of 2016 disappoints.

Data from Markit and the CIPS have revealed UK manufacturers are facing a continued slow-down in fortunes.

The December Manufacturing PMI release saw a number of 51.9 printed, markets had forecast a reading of 52.7.

The immediate impact on the sterling exchange rate complex is relatively muted at this stage but those hoping for a stronger pound would certainly have seen one had the number beaten expectations.

The bottom line is that manufacturing in the UK continues to expand, but the pace of expansion is slowing.

“Manufacturing production rose for the thirty-third month running in December, underpinned by higher intakes of new business from both domestic and export clients.” - Markit / CIPS.It seems that UK exports remain in expansion territory confirming that the decline in the value of sterling since mid-2015 has proven supportive.

“New export orders rose for the fourth consecutive month in December, although the rate of increase eased to its weakest since September. Growth of new export business was driven by improved demand from clients in continental Europe, the USA, China, Scandinavia, Turkey, Singapore and the UAE.” - Markit / CIPS.We would expect the continued weakening of GBP, and talk of a substantially lower GBPUSD in 2016, to continue aiding UK exporters.

Note that the PMI report confirms employment levels in UK industry continue to improve - something that will support expectations for a 2016 interest rate rise at the Bank of England.

“Staffing levels also improved, from last month’s stagnant position, and this month more jobs were created across all sub-sectors and at both SMEs and larger companies. Falling input prices improved business margins as many firms seemed reluctant to pass on savings to clients to make up any perceived losses suffered earlier in the year,” says David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply.