Sterling one of the worst-performing currencies, Euro still under pressure, Dollar up
13/Jan/2016 • Currency Updates•
The Pound declined again throughout the London trading on Tuesday and had the dubious honour of being one of the worst-performing major currencies in the world yesterday. The currency extended its run of losses to around 2.5% against the US Dollar so far in 2015. More underwhelming economic data was released yesterday in the UK and that added further doubts about the strength of Britain’s economic recovery.
Although the warmer weather this winter has been nice for us, it has also resulted in a sharp fall in industrial output, partially due to us not using our heating systems as much.
Manufacturing and industrial production figures both fell well short of expectations, raising further concerns among investors that the Bank of England would be delivering another dovish message at its monetary policy meeting on Thursday. This caused Sterling to tank by over 1% against the US Dollar at one stage to a fresh five-and-a-half-year low.
A dovish tone will likely cause exporters to became increasingly nervous. Limited data across the board today means that investors are now eagerly awaiting BoE Governor Mark Carney’s speech on Thursday.
The Euro remained under pressure after the US Dollar gained for the third straight day, with calmer financial markets following the recent turmoil in China, enhancing appetite for currencies offering a higher yield.
Elsewhere, oil prices suffered yet another volatile day, tanking to a new 12-year low yesterday morning. The Russian Ruble, Norwegian Krone and Canadian Dollar all remain around multi-year and record lows in the case of the Ruble.
Major currencies in detail:
Sterling declined by 0.8% versus the US Dollar and by 0.3% against the Euro yesterday, falling to its lowest level against the Greenback since June 2010.
Economic data yesterday was poor across the board, with manufacturing and industrial production both falling in the month to November according to the Office for National Statistics. Output in the industrial sector fell by 0.7%, its sharpest monthly decline since early 2013, as unusually mild weather reduced consumption of electricity and gas.
Similarly, the data suggested that the manufacturing sector in the UK remained fragile at the back-end of last year. Output in the sector fell by 0.4% in the month and by a sizable 1.2% on a year previous. The dire performance was worse than expected by any of the 30 analysts polled by Reuters.
This provides additional evidence that the Bank of England will likely hold fire from hiking interest rates until the second half of the year at the earliest. Carney disappointed investors on Tuesday by refusing to comment on monetary policy ahead of this week’s meeting.
There’s no economic data out in the UK today, although the Bank of England’s Andrew Bailey will be speaking in London at 11:00am this morning, ahead of tomorrow’s BoE meeting.
A lack of any major data releases in the Eurozone yesterday could not prevent the single currency from falling by 0.6% versus the USD.
There was further evidence regarding Germany’s Bundesbank’s apparent opposition to looser monetary policy settings in the Eurozone. Bundesbank Chief Jens Weidmann claimed that there were unintentional side-effects stemming from the ECB’s large scale quantitative easing programme, including a reduction in banking sector profits.
European Central Bank members Peter Praet and Sabine Lautenschläger both spoke during the day, although neither commented on monetary policy.
Focus in the Eurozone today will be on the release of the latest industrial production data.
The US Dollar gained for a third straight session, up by 0.6% against its major peers.
There was some more encouraging labour data released in the US on Tuesday, further indicating the tightening in labour market conditions that has underlined the recent recovery in the country’s economic performance.
The monthly JOLTS job openings ticked upwards in November, increasing from 5.35 million to 5.43 million, marginally above forecasts. The quit rate also climbed, generally seen as a sign of broad labour market strength, rising from 1.9% to 2.0% for the first time in several months.
Economic data in the US is thin on the ground today. A couple of speeches from Federal Reserve members Eric Rosengren and Charles Evans this afternoon will likely be the focus on an otherwise quiet day. Investors will already have one eye on Friday’s retail sales data as the next major data point out of the US economy.
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