Sterling falls (again) after poor Manufacturing Output

Tuesday 12th March 2013 

Good afternoon. I’m afraid to say the Pound has fallen further against both the Euro and US Dollar since my post last week. In today’s column I’ll look at the reasons why rates have fallen further, in addition to what data is being released in the coming days that could further impact the rate. So to summarise what we'll look at today:

• Pound falls after poor Manufacturing Data
• Sterling/Dollar falls after better US jobs data
• What might affect the rate in the coming days
• How to acheive the best possible exchange rates

Sterling falls (again!) after poor Manufacturing Output 

The pound has fallen against the dollar and the euro this morning, after official figures showed UK manufacturing output fell by 1.5% in January from the month before. The drop came after a slight rise in December. This latest news increases the chance of the UK heading into a triple dip recession, and that is why the Pound has fallen further. 

Immediately after the news Pound/Euro rates fell to 1.1370, and Pound/Dollar fell to 1.4840. We have since seen a slight recovery this afternoon, but not by much. 

Meanwhile, the National Institute of Economic and Social Research have said UK economic output contracted between December and February by 0.1%. They have also revised their estimate for the three months to January from flat to a contraction of 0.2%. 

The UK economy contracted in the final three months of 2012, and the UK will be back in recession if economic activity shrinks this quarter. Economists said the manufacturing figures increased the chances of the UK falling back into recession. 

In turn this would mean further Quantitative Easing for the UK, and it’s also likely other rating agencies would downgrade the UK which would push the Pound lower still.

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Pound also now well below $1.50 vs. the US Dollar 

Late last week we had the latest non-farm payrolls data from the USA, which looks at the total jobs created excluding the agricultural sector (due to its seasonal nature). The numbers showed 236,000 were created, and the forecast was only 161,000. As the number was so much better than expected, the US Dollar gained strength and became more expensive to purchase, pushing rates lower. 

This combined with the shaky UK and EU economies really do cement the dollar as the safe investment of choice, and so further strength could be likely.

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What data is out in the next few days that might shift the rate? 

Economic data is released every day, and if it’s better or worse than forecast, it can affect exchange rates quickly and without warning. For more information on how these releases could affect the exchange rate you’re interested in, get in touch with me today. 

So what data is coming in the next 48 hours? Well on Wednesday, we have some inflation data from the EU and also the latest EU Industrial Production figures. Over in the United States we have Trade Balance numbers, and also Retail Sales which are a good overall barometer of economic activity. 

On Thursday we have the Bank of England monthly bulletin, which provides regular commentary on market developments and UK monetary policy operations. Often comments from the BoE can affect the value of the Pound. 

We also have the European Central Bank giving a report that contains a detailed analysis of the prevailing economic situation and the risks to price stability.  

Contact me to find out how this data could affect you.

Getting the best exchange rates 

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Why has Pound fallen against Euro August 2011

Wednesday 10th August 2011

Good morning. Sterling has fallen quite a bit in the last 24 hours, pushed down ahead of today's Bank of England (BoE) inflation report, that may well present a poor assessment of the UK economy. At 08:30am this morning rates are as follows:



• GBP/EUR 1.1312

• GBP/USD 1.6254

• GBP/AUD 1.5691

• GBP/NZD 1.9465

• GBP/CAD 1.5964

• GBP/ZAR 11.579

• GBP/JPY 124.76

• GBP/DKK 8.4263

• GBP/NOK 8.8614

• EUR/USD 1.4366



Sterling down vs Euro and US Dollar



So why has the Pound fallen against the Euro August 2011? It's mostly due to today's BoE inflation report, that is expected to issue a poor assessment of the economy today. This follows data earlier in the week that showed a surprise fall in manufacturing output. This reminded investors of the fragility of the economy as it faces new challenges from global financial turmoil and also the widespread riots in London and other cities.



Today's BoE report will show it's latest growth and inflation forecasts today. Markets will be looking for clues to more Quantitative Easing, and it's this expectation that has hurt the Pound and dragged it down from highs against the Euro seen earlier in the week.



Just a few days ago markets were talking about Sterling being a new safe haven currency, however analysts now realise Sterling's gains are mostly due to the fact it's the best of a bad bunch. With issues in the USA and the EU regards debt, the Pound had gained as other currencies lost out.



However, according to Reuters, in the coming weeks sterling could be "well-placed" for more gains given the concerns about debt problems in the United States and its credit ratings downgrade, as well as the debt crisis in the euro zone. Meanwhile rioting and looting across London and in other cities this week also darkened the outlook for sterling as it pointed towards spreading social unrest.



Today's Data



German inflation figures will be closely watched today, for any hint of a further EU interest rate hike. In the UK we see a confidence report, and there is a Bank of England inflation report, along with a speech by BoE governor Mervyn King. Watch for any comments regards further fiscal stimulus (Quantitative Easing) that may weaken the Pound further.



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