Tuesday 8th July 2014
The Pound has fallen from its recent highs this morning, after figures showed Industrial and manufacturing production in the UK was much less than expected.
Manufacturing output in the UK recorded a surprise fall of 1.3% in May, the biggest decline since January 2013. The figure from the Office for National Statistics (ONS) was much weaker than economists’ forecasts of an increase of 0.4%, and as a result the Pound fell by around 0.5% against other currencies including the Euro. You can see the drop in the chart below when the figures were released at 09:30am; however rates have recovered back to €1.26 against the Euro, and $1.7120 vs the US Dollar.
So why exactly did the Pound fall?
Regular readers will know that it is speculation on UK interest rates that has been driving the Pound upwards recently. Today’s figures are a bit of a reality check for the UK after a few months of very positive data. The markets see today’s figures meaning there is now less chance of an interest rate rise before the end of the year.
The rumour of higher interest rates has been driving investment towards the Pound due to the higher potential return. Today’s figures mean it’s less likely, and so the Pound has fallen slightly.
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