GBP USD Exchange Rate Slides as UK Manufacturing Data Disappoints
October 23, 2017 - Written by John Cameron
STORY LINK GBP USD Exchange Rate Slides as UK Manufacturing Data Disappoints
The Pound US Dollar (GBP USD) exchange rate beat a hasty retreat this morning as the pairing was stung by the release of monthly survey data for Britain’s manufacturing sector.
Sterling Slips on lacklustre CBI Manufacturing Reports
The Pound is trending lower at the start of this week’s session as a markets reacted to a damning report on the UK’s industrial sector’s growth and outlook amongst manufacturers.
According to data compiled by the Confederation for British Industry (CBI) the UK’s monthly industrial orders balance tumbled from 7 to -2 in October, falling well short of an expected rise to 9 and reaching its lowest levels since November.
The slowdown was largely attributed to weaker output expectations and lacklustre export order growth, again appearing to dispel suggestions that the decline in the Pound would help to bolster the appeal of British goods to foreign buyers.
The CBI’s surveys also reported an equally unsettling decline in Business Optimism for the coming months, as the index plummeted from 5 to -11 for the fourth quarter.
Most worrying for markets however is that CBI’s survey revealed that firms are planning to curtail investment over the coming quarter, with businesses also wary about potential labour shortages, something that could see growth slow even further in the future.
The report from the CBI read;
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‘Investment intentions for the year ahead deteriorated, with spending plans for buildings at their lowest since July 2009. Expectations for spending on new equipment also weakened. Plans for investment in training and innovation remained much firmer by comparison.’
‘Concerns over labour shortages edged up from already high levels, with the number of respondents citing them as a limitation to investment plans at the highest since October 2013.’
Meanwhile the weak manufacturing report is also seen by analysts as another signal that the Bank of England (BoE) may hold off on raising interest rates when policymakers meet next month.
US Dollar Strengthened as Japanese Yen Weakens
The US Dollar advanced this morning as investors flocked to the currency following a dip in the Japanese Yen (JPY).
This drop in the Yen follows a comfortable victory for Japanese Prime Minister Shinzo Abe in snap elections over the week as his Liberal Democratic Party-led (LDP) coalition managed to hold on to its two-thirds ‘super majority’ in the lower house.
The snap election was called by the PM last month as he essentially asked the people of Japan to grant him a mandate to help deal with ‘crises’ in the region, following the launching of two North Korean ballistic missiles over Northern Japan in recent months.
Abe’s re-election also looks set to continue his programme of ‘Abenomics’, with his government and the Bank of Japan (BOJ) expected to retain its dovish monetary policy, something that applied some downward pressure on the Yen.
As the other half of the prominent JPY/USD pairing this meant investors shifted towards the US Dollar early this morning as the Yen fell, with the ‘Greenback’s appeal also being bolstered by increased optimism over Trump’s tax reforms as following the approval of his 2018 fiscal budget.
GBP USD Forecast: Annualised UK GDP to Slip in Q3?
Looking ahead the GBP USD exchange rate may extend its losses later this week as economists forecast that the UK’s latest third quarter GDP estimate will show that annualise growth slowed from 1.5% to 1.4% when it is released on Wednesday.
Meanwhile the US Dollar could be in for an equally miserable Wednesday with the publishing of the US’s latest Durable Goods data as analyst predict that order growth will have tumbled from 1.7% to 1% in September.
Current Interbank Exchange Rates
At the time of writing the GBP USD exchange rate was trending around 1.3184 and the USD GBP exchange rate was trending around 0.7584.
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