Foreign Exchange Outlook : UK Data Releases Place GBP USD and GBP EUR Rates Under Pressure as UK House Prices Dip Again

8 Sep 2011 at 9 AM - Written by John Cameron

STORY LINK Foreign Exchange Outlook : UK Data Releases Place GBP USD and GBP EUR Rates Under Pressure as UK House Prices Dip Again

The Pound Euro exchange rate (GBP EUR) is 1.1314. The Pound Dollar exchange rate (GBP USD) is 1.5925. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5027.

Any investors still holding Sterling-denominated assets and looking for a reason to shift their funds out of the UK, have been provided with significant food for thought over the past twenty four hours.

Yesterday morning’s Industrial Production figure for July showed an annualised contraction of 0.7% in Britain’s industrial output. This shows a marked acceleration in the slowdown in activity in the UK’s industrial base, as June’s counterpart figure showed at -0.3%. Figures released at the same time showed that the UK’s manufacturing output is still growing, (as of July), however growth rates are slowing.

There was more bad news from the UK’s housing sector with yesterday’s release of Halifax’s House Price Survey for August. The survey showed that British house prices dropped by a monthly 1.2% in August. The figure was the latest piece of UK housing data to suggest that UK house prices are on the wane – a worrying development for an economy which has traditionally relied on its housing sector to drive economic activity forward.

Perhaps the most concerning UK data release yesterday was the closely-watched NIESR GDP growth estimate for the 3 months to the end of August. The figure estimated that the UK economy expanded by a paltry 0.2% during this period, against July’s counterpart figure of 0.6%. The NIESR figure has a reputation for accurately predicting the Office of National Statistic’s official UK GDP number. Combined with UK Chancellor of the Exchequer George Osborne’s reiteration earlier in the week that he expects Britain’s recovery to be ‘choppy’, the outlook does not look particularly positive for the UK’s real economy.

In spite of yesterday’s Sterling-negative releases, the GBP EUR and GBP USD rates failed to break significantly lower than their Tuesday lows, as fears persisted about Eurozone sovereign debts and support for the Greenback eased as appetite for risk seeped back into the market. However, this could all change later today if the Bank of England elects to further loosen monetary policy by allocating more funds to its Quantitative Easing scheme.


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