UK manufacturing unexpectedly falls on weak exports

Claire Hogarth10/Dec/2014Currency Updates

GBP

After dipping against the Dollar during morning trading, Sterling was able regain ground on the greenback as the day progressed, finishing 0.05% up despite disappointing industrial and manufacturing production figures.

Output from Britain’s industries experienced a surprise decline in October as Industrial Production fell by 0.1% MoM, equalling its greatest decline since May. The data released by National Statistics showed that the annualised figure did, however, increase by 1.1%, although this was well down on the 1.8% that was forecast. Even more worrisome was the fall in Manufacturing Production, which declined by 0.7% in October, its largest monthly fall in five months. Eight of the ten components that make up manufacturing output did, however, increase year on year, causing the annualised figure to rise by 1.7%, although again this was well below forecasts of 3.2%. Elsewhere, the monthly National Institute of Economic and Social Research GDP estimate came in, as expected at 0.7% for the third consecutive month.

Today sees the release of Britain’s trade figures for October at 9.30am.

EUR

The Euro appreciated against its major peers on Tuesday, climbing 0.45% on the Pound and by 0.5% on the Dollar after some encouraging trade data in the Eurozone.

Germany’s trade surplus grew marginally in October after imports showed a sharper decline than exports due in part to the weaker Euro. Exports fell by 0.5% in October, while imports declined by 3.1%, registering a trade surplus of €20.6B in Europe’s largest economy. This was just shy of July’s record high. Similarly, exports in the struggling French economy increased in October after strong exports of airplanes and arms according to the country’s customs office. The country’s trade deficit fell slightly to €-4.6B after exports rose by 0.3% on September.

Wednesday will see limited data released in the Eurozone, with market volatility mostly dependent on external releases. The main announcements will come from France, with Nonfarm Payrolls and Industrial Output in early morning trading.

USD

The greenback weakened by 0.4% against its major counterparts yesterday, the second consecutive day of declines, despite stronger than expected data releases.

A string of second-tier announcements in the US yesterday was headlined by the release of Wholesale Inventories, which beat expectations in October. The figure, which captures sales and inventory statistics from the second stage of the manufacturing process, came in at 0.4%, marginally above the 0.2% that was forecast. Stocks at wholesalers were boosted by an increase in inventories of electrical goods, machineries and metals, although auto inventories fell by 1.4%. More strong employment news in the US as the number of unfilled job openings rose in October to the second highest level in fourteen years. The Labour Department figure increased by 3.2% to 4.83 million, marginally shy of the record high registered in August. Elsewhere, the Redbook index increased year on year by 3.9%, while the NFIB Business Optimism index rose to 98.1, its highest level in the past three years.

Mostly second tier releases in the US again today with Mortgage Applications at midday likely to cause the most volatility.

Rest of the world

The government of Norway signalled it may slash its economic forecast for next year after the recent slump in oil prices, of which have seen crude oil value fall by 41% since June, has threatened growth in Western Europe’s biggest oil exporter. The Krone weakened by 0.85% and has now fallen by 3.5% in the past fortnight.

China’s Yuan fell to its weakest position since July after the country experienced its slowest export growth in seven months. The currency of the world’s second largest economy fell by 0.2% on Tuesday on the back of poor export data from the beginning of the week showed only a 4.7% annual climb.

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Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.