Sterling falls yet again on poor data

Good Morning. The pound fell yet again yesterday after much worse than expected Manufacturing and Industrial production data, and analysts expect further declines for the currency given the gloomy economic outlook for Britain and worries on the political front. At 08:30am 11th March rates are as follows:

  • GBP/EUR 1.0969
  • GBP/USD 1.4963
  • GBP/AUD 1.6334
  • GBP/NZD 2.1389
  • GBP/CAD 1.5349
  • GBP/CHF 1.6027
  • GBP/ZAR 11.134
  • GBP/JPY 135.23
  • EUR/USD 1.3640

Manufacturing and Industrial Production
The Industrial and Manufacturing Production data measures outputs of the UK factories and mines and the manufacturing output. The figures are seen as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP and so can affect the pound.

The figures were expected to show an increase in both measures, however we actually saw a significant drop in output. As the figures were much worse than expected, this reduced confidence in the UK economy, and as a result Sterling was sold by investors causing exchange rates to fall.

UK Gross Domestic Product
We also saw the GDP estimate come in slightly under expectations putting further pressure on the pound. It did show the economy should grow by 0.3%. The NIESR growth figure for the three months to February is in comparison with the September to November period.
The research body said it did not expect UK economic output to return to the peak seen at the start of 2008 until 2012. Further pressure on the pound then.

Political Uncertainty
This is another area that’s affecting the pound in a big way. In a nutshell, economists want big cuts as soon as possible to reduce the deficit. However, the government seem unwilling to do this, and seem to prefer spending money they don’t have. The prime minister yesterday spoke about the budget which will be in 2 weeks. There’s good insight on Stephanie Flanders blog on the BBC site. Check it out. The budget will probably cause significant volatility for Sterling.

So when should you buy your currency?
That’s the question I’d love to be able to answer! Waiting may result in a higher rate, but of course more bad economic data and rates could fall. It’s nothing more than a gamble. I think there’s more chance that the pound will continue to weaken rather than shoot back up, and so those that don’t wish to gamble with their hard earned savings may wish to protect against adverse rate movements . This is easy to do with a Forward contract. You can fix today’s rates for up to 2 years, and just pay a 10% deposit of the total.

This way, whichever way rates move you know exactly what rate you have. It’s simple – either gamble or have peace of mind. Contact us to discuss your currency needs.

Todays Data
Aus – Unemployment
EU – ECB Monthly Report
US – Jobless Claims
Swi – Interest Rate Decision
NZ – Retail Sales

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