It seems to be that any day in which we are due some form of data release from the UK, that the pound will end up lower with yesterday certainly being no exception. Sterling fell new 2.5yr lows versus the US dollar, reversed back into the 1.14s against the euro while GBP/AUD made an all-time low in the aftermath of some very poor manufacturing and industrial production numbers.
Against an expectation of a slight rise for these industries we instead saw a calamitous decline which, unless we see the construction or services sectors stage a dramatic comeback, almost guarantees that Q1 GDP for the UK will be negative. In another release, the National Institute of Economic Social Research predicted that growth for the 3 months through February was -0.1%.
While the lack of growth is an obvious problem the seeming lack of support from the government is causing deeper pain for sterling. The recent swoon of data must be causing those in Treasury to consider easing the rate of deficit reduction.
Finally expectations of UK inflation rose to the most since September 2008 yesterday on the basis of investors thinking that further QE will be forthcoming from the Bank of England in the coming months. This now puts the expected rate of inflation in CPI terms at close to 4x the rate of wage increases.
Once again we must emphasise that it is data that is driving this decline in sterling. A turnaround in data or a resumption of European woes will see sterling itself become more loved but, until that happens, GBP is very much in the crosshairs.
Recent industrial and manufacturing production numbers from France and Germany were both poor last week and therefore the prospect for a more negative number today for the entire Eurozone has been raised. The release is due at 10.30am.
Yesterday’s euro strength was emboldened by reports from an ally of Angela Merkel that Germany was willing to make concessions on its aid package to Cyprus in respect to losses for bank depositors given the obvious instability that it could cause. That being said, we are unlikely to get a decision on Cyprus for a fair while.
The US economy is back in focus today with advance retail sales for the month of February expected to show a decent 0.5% increase. This looks a little high to my eyes given the tax increases seen by your average American since the beginning of the year although the notable employment market increases will have helped consumer confidence in the short term.
An Italian bond auction will see whether we should expect further yield increases due to political uncertainty following a one-year auction yesterday.
Against an expectation of a slight rise for these industries we instead saw a calamitous decline which, unless we see the construction or services sectors stage a dramatic comeback, almost guarantees that Q1 GDP for the UK will be negative. In another release, the National Institute of Economic Social Research predicted that growth for the 3 months through February was -0.1%.
While the lack of growth is an obvious problem the seeming lack of support from the government is causing deeper pain for sterling. The recent swoon of data must be causing those in Treasury to consider easing the rate of deficit reduction.
Finally expectations of UK inflation rose to the most since September 2008 yesterday on the basis of investors thinking that further QE will be forthcoming from the Bank of England in the coming months. This now puts the expected rate of inflation in CPI terms at close to 4x the rate of wage increases.
Once again we must emphasise that it is data that is driving this decline in sterling. A turnaround in data or a resumption of European woes will see sterling itself become more loved but, until that happens, GBP is very much in the crosshairs.
Recent industrial and manufacturing production numbers from France and Germany were both poor last week and therefore the prospect for a more negative number today for the entire Eurozone has been raised. The release is due at 10.30am.
Yesterday’s euro strength was emboldened by reports from an ally of Angela Merkel that Germany was willing to make concessions on its aid package to Cyprus in respect to losses for bank depositors given the obvious instability that it could cause. That being said, we are unlikely to get a decision on Cyprus for a fair while.
The US economy is back in focus today with advance retail sales for the month of February expected to show a decent 0.5% increase. This looks a little high to my eyes given the tax increases seen by your average American since the beginning of the year although the notable employment market increases will have helped consumer confidence in the short term.
An Italian bond auction will see whether we should expect further yield increases due to political uncertainty following a one-year auction yesterday.