Strong data fails to support pound

9 June, 2016

Rob Bastin

UK Manufacturing & Production
Yesterday was another relatively quiet day on the economic calendar with just a couple of main releases to report on. The morning session began with the latest UK Manufacturing and Industrial Production figures, that last month saw some of the worst results for a number of years. Because of this the market expectations were very low for these results forecasting zero growth for Manufacturing and Industrial Production in the month of April. Markets were somewhat shocked by the results that in fact posted growth of 2.3% and 2% respectively, in what is the biggest increase seen for over 2 years.

The market reaction was of course initially a positive one with a small spike in Sterling exchange rates, however this good news goes completely against the current negative trend and sentiment and so this spike was extremely short lived. Sterling exchange rates gradually dropped throughout the day underlining the negativity towards the pound as not even these good figures are providing any real gains.

Kiwi Rate Decision
Late last night the Royal Bank of New Zealand announced its latest interest rate decision. Markets were largely expecting a hold at 2.25% but with some fearing a rate cut could be implemented due to the recent downgraded economic outlook. The decision was confirmed at no change and the accompanying statement was slightly more positive stating that the outlook for global growth appears to have stabilised. In turn the Kiwi has gained around 4 cents against the pound since the announcement late last night.

The Day Ahead
Today is another quite day on the calendar with just UK Trade Balance figures out at 9:30am this morning. The markets are however largely ignoring eco-stats and the sole focus currently is on the pending referendum and the increasing fear that the UK could leave the EU and the pound could tumble as much as 10%-20% in the aftermath. Sterling is already down 0.5% across the board since the UK markets opened. If you still have a Euro requirement in the upcoming months then make sure you speak to your broker today to discuss the damage limitation tools such Forward Contracts and Stop Orders.