Pound unsteady as UK data proves disappointing

There was plenty of UK data on offer yesterday, although the results weren’t exactly upbeat. Questions continue over the health of the economy, especially after a disappointing estimate for growth during July.

The pound is largely advancing from its opening levels this morning, although it is dipping against the New Zealand dollar.

GBP/EUR is currently trending at €1.1036, GBP/USD is in the region of US$1.2978. GBP/AUD is currently at AU$1.6515, GBP/NZD at NZ$1.7818, and GBP/CAD at C$1.6534.

There is no UK data on the calendar today, but given the persistent geopolitical tensions, and the presence of top-tier US economic reports in the afternoon, it seems unlikely the pound is going to get much of a rest as the week draws to a close...

What’s been happening?

The pound was on mixed form yesterday thanks to an underwhelming slew of UK data.

Industrial production bettered forecasts, but compared to recent months the 0.5% month-on-month growth was nothing to write home about. Manufacturing stagnated on the month and construction output declined -0.1% instead of rising 1.4% as forecast.

Next, the trade deficit yawned wider than had been expected, overshooting the forecast shortfall by almost £1 billion to hit -£4.47 billion.

Finally, July’s GDP estimate from the National Institute of Economic and Social Research (NIESR) came in at just 0.2% - economists had expected the projection would have been for 0.3% growth. This indicates that economic growth may have slowed back down to the level seen in the first quarter after an extremely minor rebound in the second quarter.

There was little going on for the euro, but GBP/EUR was able to strengthen as continued geopolitical tensions saw investors abandoning the euro in favour of the US dollar.

North Korea responded to Donald Trump’s recent fiery rhetoric by outlining potential plans to fire missiles into the ocean just short of the US territory of Guam in an attempt to bait the President.

Market demand for somewhere safe to park their money saw GBP/USD fall as investors flocked to the US dollar.

What's coming up?

There is no UK data on the economic calendar tomorrow, leaving the pound firmly in reactionary mode, assuming no political or Brexit-based news crops up.

Eurozone data is thin on the ground; unless the finalised version of July’s German consumer price index deviates from earlier estimates GBP/EUR may not see too much turbulence until the afternoon.

Things may pick up after lunch, due to the scheduled release of US inflation data. The consumer price index may not be the Federal Reserve’s preferred way of measuring inflation, but it will nonetheless give markets a good idea of the state of price growth.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.