As the odds of the Bank of England upping stimulus increase following a batch of UK data which failed to meet economist’s modest expectations, Sterling has posted losses against the majority of its peers.
The Pound Sterling Exchange Rate was in the region of 1.4840 against the US Dollar as of 10:14 am
Hopes that the UK might avoid an unprecedented triple-dip recession received another knock today as the nation’s industrial output fell. Manufacturing also slid by 1.3 per cent, despite economists expecting stagnation.
According to the Office for National Statistics, production slumped by 1.2 per cent in January from the previous month. The average estimate of economists was for an increase of 0.1 per cent.
The drop can largely be attributed to the closure of the Schiehallion platform triggering a 4.3 per cent decline in oil and gas.
In December industrial production climbed by 1.1 per cent.
Before the report was released IHS Global Insight economist Howard Archer stated: ‘Muted global economic growth, and Eurozone economic weakness in particular, is currently still a constraint for foreign demand for UK manufactured goods. The manufacturing sector still has its work cut out to achieve sustainable decent growth.’
Separate ONS data showed that the trade deficit on goods reduced from 8.74 billion Pounds in December to 8.2 per cent in January. Economists expected the deficit to expand to 8.95 billion Pounds.
Imports slid by 4.2 per cent whilst exports fell by 3.5 per cent.
Meanwhile, earlier this morning a report issues by the Royal Institution of Chartered Surveyor’s revealed that UK house priced slipped in the three months to January, with the seasonally adjusted house price balance dropping from -4 to -6.
Economists had expected the balance to rise to -2, but the actual result does indicate that house prices are broadly stabilising.
The report also showed that house sales achieved a 2 ½ year high, while a non-seasonally adjusted balance measuring property professionals’ forecasts for price changes in the year ahead increased from +18 to +25, a 3-year high.
Peter Bolton King, global residential director with RICS, issued the following statement with the report: ‘The housing market now appears to be picking up across most parts of the UK. This may, in part, be down to the growing availability of mortgage finance through schemes such as Funding for Lending. However, even with activity running at its best level since the middle of 2010, it is still well down on its pre-crisis norm.’
After the news the Pound lost ground against the majority of its currency rivals, shedding 0.4 per cent against the US Dollar (hitting a fresh 2 ½ year low). However, in light of such data the current weakness of the Pound could be considered a positive as it will make the UK more competitive when it comes to exports.
As Archer asserted: ‘Sterling’s sharp retreat will be welcomed by UK manufacturers.’
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