Sterling Suffers as Data Falls Short
The Pound to US Dollar exchange plummeted on Tuesday after the UK published some less-than-impressive Manufacturing Production and Industrial Production figures.
At the start of the European session the Pound was holding steady against the US Dollar and was able to advance on the Euro following the release of mixed German trade data. However, as trading progressed Sterling went on to post widespread declines.
The GBP/EUR exchange rate shed 0.25% while the GBP/AUD exchange rate shed 0.5% and the GBP/NZD exchange rate fell by a whopping 0.75%.
The Pound to US Dollar pairing also dropped 0.25% as the appeal of the British asset was knocked.
Manufacturing Production Slides
Over the last few months UK fundamentals have had the habit of surprising to the upside, thereby painting a picture of a broad-based economic recovery and adding to the case for the Bank of England to increase interest rates sooner rather than later.
However, today’s reports have shown that weaknesses still remain.
Economists had expected UK Manufacturing Production to increase by 0.4% in May, month-on-month, following a 0.4% advance in April. But output actually dropped by -1.3%, taking the year-on-year figure to 3.7% instead of the 5.6% anticipated. The manufacturing slump was the most notable for 16 months.
Similarly, Industrial Production in the nation fell by -0.7% on a month-on-month basis ad recorded an annual gain of 2.3%. Respective increases of 0.3% and 3.2% had been forecast.
The Office for National Statistics, responsible for compiling the data, had no explanation for the results. The GBP to USD exchange rate hit a low of 1.7081 after the report was released.
Before the data was published economist Howard Archer noted; ‘Improving global growth should help UK manufacturers’ export orders over the coming months. Although the upside for export orders may very well be constrained by domestic demand in the Eurozone improving only gradually.’
BoE Rate Hike Odds Dip
The results support the argument in favour of holding interest rates at record lows until next spring. The Bank of England is due to gather later this week and deliver its rate decision, and these reports could have a bearing on the rhetoric adopted by the institution.
The Pound to US Dollar exchange rate may well experience additional movement as the day continues.
The National Institute of Economic and Social Research (NEISR) will be publishing its UK GDP estimate for June at 15:00. NIESR estimated growth of 0.9% for May so investors will hoping for similar, or broader, expansion in June.
GBP to USD volatility could also be triggered by the US JOLTs Jobs Openings figures and the US Consumer Credit report.
UPDATED: 22:40 GMT 08 July, 2014
Pound to US Dollar (GBP/USD) Exchange Rate Unmoved by US News
After recovering earlier losses, the Pound to US Dollar exchange rate was trending in the region of an over five-year high as investors focused on the soon-to-be-published minutes from the latest Federal Open Market Committee meeting.
Tuesday’s US Jolts Jobs Openings report showed that job openings increased to an almost seven-year best. The result had little impact on the US Dollar’s exchange rate.
As the minutes were taken prior to the US posting such an impressive employment gain (the US unemployment rate unexpectedly dropped to 6.1%) it is likely that they will be dovish in tone.
In recent weeks Federal Reserve Chairwoman Janet Yellen has made it clear that she believes interest rates should be on hold until long after quantitative easing has been completely tapered. If the minutes reiterate this stance the ‘Greenback’ could fall and the Pound to US Dollar (GBP/USD) exchange rate could test new highs.
UPDATED: 09:15 GMT 09 July, 2014
Pound to US Dollar (GBP/USD) Exchange Rate Slips after UK Reports
As the European session got under way the Pound to US Dollar exchange rate slipped slightly as investors responded to the news that annual UK retail sales prices slumped by the most since 2006 last month.
Separate figures, compiled by Halifax, revealed an unexpected decline in UK house prices. Prices were down by 0.6% on the month, economists had anticipated a 0.2% increase.
As an overheating UK housing market is one of the main arguments in favour of the Bank of England increasing interest rates, if house prices should continue to fall it could dampen rate hike bets significantly.
With additional UK data limited today, any further movement in the Pound to US Dollar (GBP/USD) exchange rate is likely to be the result of US developments. While the US Mortgage Approval data will be of interest, investors will be bracing themselves for the release of minutes from the most recent Fed policy meeting. A particularly dovish set of minutes could help Sterling rebound against the ‘Greenback’ during the North American session.
US Dollar (USD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
US Dollar,
,Pound Sterling,0.5851,
US Dollar,,Canadian Dollar,1.0677,
US Dollar,,Euro,0.7356,
US Dollar,,Australian Dollar,1.0643,
US Dollar,,New Zealand Dollar,1.1367,
Canadian Dollar,,US Dollar ,0.9367,
Pound Sterling,,US Dollar,1.7093,
Euro,,US Dollar,1.3594,
Australian Dollar,,US Dollar,0.9400,
New Zealand Dollar,,US Dollar,0.8796,
[/table]
Comments are closed.