Pound suffers following poor data releases

Kingsley Walker Currency BrokerWritten by:
Kingsley Walker
Currency Broker
T: 01442 892071
E: [email][email protected][/email]

Junior doctors staged a 24 hour walk out yesterday as negotiations between current Health Secretary Jeremy Hunt failed regarding newly introduced contracts. The pound hoped to re-negotiate with the markets yesterday following poor data releases prompting investors to move out of the pound and into the euro and dollar.

Kicking the day off we had manufacturing and industrial production figures both missing forecasts, manufacturing posted a -0.4% reading and industrial -0.7%, respectively. Industrial production suffered one of its biggest falls in two years as unusually mild weather curbed demand for heating gas, with consumption dropping 2.1%. Chris Williams, chief economist at Markit said, “Manufacturers are having a torrid time. Producers are having to deal with a toxic combination of a historically strong exchange rate, weak global demand, intensifying competition, notably from the US and continental Europe, as well as growing uncertainty about the outlook at home and abroad.” The data helped to reignite fears that an interest rate decision would be pushed back as the UK continues to struggle with mixed data releases. JP Morgan economist Malcolm Barr commented, “Recent disappointment in the pay data and drop in oil prices had already put our call for the MPC to raise rates in May at risk,” JP Morgan said it now expects the MPC to wait until the final months of the year before hiking rates.

After the data releases the pound continued its downward trend against both the dollar and euro, with GBP/USD hitting a five and a half year low. GBP/EUR also moved to a rate not seen since February last year, highlighted in the graphs below.

GBP/USD

GBP/USD 24 hours graph

GBP/EUR

KEW GBPEUR

Mark Carney, Bank of England head, gave a speech in Paris yesterday at the Christian Noyer Symposium, however, the outcome was muted ahead of Thursday’s MPC statement and interest rate decision. Instead Carney chose to outline how UK banks profitability has fallen since the financial crisis. The reason for the fall has been due to stricter regulation, taking on less leverage and heavier fines for past behaviour. Given the mixed data release from the UK expect the MPC to maintain current interest rate levels and Mr Carney to be fairly buoyant regarding the economy.

Today’s Data

There is nothing from the UK today and only a few minor pieces from both the Eurozone and US. We have French CPI figures, followed by industrial production numbers for the Eurozone. Over in the US we have 10 year bond auction data and the federal budget balance after London trading closes.

Kingsley Walker
Currency Broker
T: 01442 892071
E: [email][email protected][/email]