Poor Manufacturing Data Causes Small Sterling Drop

2 August, 2012

It seems that in the past few months, manufacturing levels have taken a significant slump on a worldwide scale. Across the Atlantic US manufacturing growth shrank for the second month in a row. The Eurozone fared little better, with exports of manufactured goods dropping significantly. Most worrying is the fact that Germany, the EU’s financial powerhouse posted one of the lower scores according to the surveys. Any negative data from Germany tends to weaken the Euro as a whole, especially since many are looking towards the relatively well-off country to provide much of the money for future bailouts.

The UK wasn’t safe from this slump either, with the manufacturing sector shrinking its fastest in 3 years. The announcement of this data caused sterling to drop to its lowest levels against the Euro for 2 weeks, with the EU currency gaining 0.5% against the pound. Whilst trading levels remain well above the record lows we saw last year, this announcement keeps open the chance of Quantative Easing, which would, as it has in the past, cause the value of sterling to drop. However, analysts expect the Bank Of England to leave interest rates and its quantitative easing levels unchanged when it announces its next policy decision later today.

Outside the BOE, all eyes will be on the European Central Bank meeting later today, where Mario Draghi has been saying he is ready to do “whatever it takes” to support the euro (a comment that no doubt assisted the Euro’s slight gains against sterling). This has caused analysts to suspect that the ECB will take unprecedented action to bring down Spain’s cost of borrowing. Whatever the results of the meeting, it is likely to have significant impact on the rates for transferring Euros, whether positive or negative.

With the excitement about the Olympics, many people could be forgiven for not noticing the (admittedly less exciting) financial news. In order to keep up to date, as well as transfer any currency, give your account manager at Currency Index a call to see how we can assist you.