The Pound to US Dollar exchange rate (GBP/USD) struck a fresh 2.5-year low of 1.4832 yesterday as weak Manufacturing Production and Industrial Production prints led to a renewed sense of dread that Britain may be on the verge of sliding into a triple-dip recession.
Economic concerns also sent the Pound to Canadian Dollar (GBP/CAD) to a fresh 2.5-year low of 1.5245, and the Sterling to Australian Dollar (GBP/AUD) rate down to a fresh 28-year low of 1.4832. Yes, astonishingly both GBP/USD and GBP/AUD hit daily lows of 1.4832.
The odd statistical coincidence aside, there was little to cheer about yesterday in relation to the Pound. The annualised UK Manufacturing Production index shrunk by an abysmal -3.0%, compared to analysts’ expectations of -1.0%, and the UK Industrial Production ecostat plummeted by -2.9% to its worst score since May 1992.
The appalling figures were blamed, in part, by the snowstorms in Britain during March, which caused a shutdown of a North Sea oil field that contributes around 3%-6% of the UK’s oil production. However, the extremely soft Manufacturing and Industrial Production figures, coupled with the recent declines in Construction and Manufacturing PMI’s, suggest that the UK has stalled coming out of the blocks so far in 2013.
With the British economy’s hopes of returning to growth fading by the day, investors took it upon themselves to give the Pound a fresh pummeling: GBP/USD shrunk by -0.5 cents, GBP/CAD sunk by -0.6 cents, and GBP/AUD shed -0.9 cents.
But it wasn’t only traders who had a go at the Pound in light of the latest data: Sterling got its fair share of verbal abuse from analysts too:
Phillip Shaw of Investec said that “the figures hardly inspire confidence” and went on to call for further monetary easing from Chancellor George Osborne and the Bank of England.
David Tinsley of BNP Paribas described the results as “extremely disappointing” and predicted that the UK will “see a contraction in the first quarter”, which would herald the unthinkable: a triple-dip recession.
Financial journalist Olly Barratt went as far as to compare the UK currency to a vegetable: “Everyone cancel their summer holidays. The Pound is basically now worth a potato”.
It was a case of mutton dressed as lamb later on in the morning, as Britain’s Visible Trade Balance was announced to have improved slightly in January. The narrowing of the deficit was largely interpreted as misleading because it was principally caused by an unwanted drop-off in domestic demand for imports, rather than a marked increase in British export-productivity.
The economic climate worsened as the NIESR released their growth estimates for February, showing a predicted Gross Domestic Product decline of -0.1%. Although the think-tank played down the importance of a potential triple-dip recession, they did highlight the depressing fact that Britain has now failed to post any meaningful growth for nearly two years.
With the UK economy trudging through the doldrums of financial stagnation; the Bank of England widely expected to introduce further quantitative easing measures in the near future; and the highly anticipated budget for 2013 just around the corner: Sterling is likely to continue to come under selling pressure over the next few sessions.
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