Pound Sterling Exchange Rate Forecast Slumps Today on Weak UK Data

April 8, 2016 - Written by Frank Davies

STORY LINK Pound Sterling Exchange Rate Forecast Slumps Today on Weak UK Data

The Pound has lost out against its peers today, owing to major disappointment in the earlier production stats and trade balance outcomes; these reports have stacked with growing discontent over the PM's political decisions and past.

Pound Sterling Falls Lower Still on Manufacturing/Industrial Production Slump

It was a case of woes piled on top of more woes for the Pound Sterling (currency : GBP) during this morning’s session. The British unit was already floundering thanks to fears that the UK’s steel industry might be about to effectively cease to exist and concerns that the UK could vote for ‘Brexit’ on 23rd June, when this morning’s domestic Industrial Production and Manufacturing Production data was published.

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Hopes had not been high, with analysts forecasting a year-on-year 0.7% drop in activity levels in the UK’s manufacturing base, whilst a ‘no change’ result was anticipated from the counterpart Industrial Production data. When the respective results showed at -1.8% and -0.5%, investors holding Sterling-denominated assets feared the worst for the UK unit and they were correct – the Pound Sterling euro exchange rate sank to 1.2347 GBP EUR and the pair has struggled to break any significantly higher since.

UK Trade Deficit Data Fails to Support Pound Sterling (GBP) Exchange Rate

This bad news for Sterling was compounded by the latest UK Trade Balance figures, which were also published this morning. The official statistics revealed that the surplus of shipments into the UK set against exports by British companies stood at a staggering GBP4.84 bn in February. These numbers, following on from last month’s statistics which showed a UK Current Account deficit of over GBP150 bn, for 2015 compounded the impression that the UK is living well beyond its means. Considering the statistics, Howard Archer of HIS Global Insight observed that,

‘The February trade and industrial production data provide a double whammy of very disappointing news for the UK economy that bodes ill for first-quarter growth prospects,’ before going on to state that, ‘it reinforces our belief that GDP growth will have been no better than 0.4% quarter-on-quarter in the first quarter, down from 0.6% quarter-on-quarter in the fourth quarter of 2015.’

If Archer’s forecast is correct, then expect support for the Pound Sterling to tumble across the board.

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