| LONDON, Sept 7
LONDON, Sept 7 Sterling retreated from its
highest levels in seven weeks on Wednesday after British
industrial output data for July painted a less rosy picture of
the economic aftermath of Britons' vote in June to leave the
The fastest fall in manufacturing output for a year - 0.9
percent on the month - was followed by testimony from Bank of
England (BoE) policymakers in parliament which stood by the
decision to ease monetary policy aggressively last month.
Governor Mark Carney said he was "absolutely serene" about
the judgments the bank had made, even after a handful of more
upbeat purchasing manager surveys which suggest the initial hit
from the "Brexit" vote was less than previously thought.
The pound, which sank after the BoE eased policy a month
ago, fell 0.7 percent on the day to $1.3348 and 84.17
pence per euro by 1515 GMT.
"Sterling has been lifted in recent weeks by very strong
data, but this output data shows it's been a pretty mixed bag
following the referendum," Societe Generale currency strategist
Alvin Tan said.
"I think what's probably more important now is the August
number because of the most recent bounce that we saw in the PMIs
(surveys of purchasing managers) ... but we continue to see
further downside risk to sterling."
While on the back of PMI surveys the pound has proved more
robust than many banks were expecting a month ago, dealers say
extremely volatile daily moves in the currency reflect the lack
of conviction that it can gain strongly from here.
Manufacturing output fell more than the 0.4 percent decline
forecasted by economists. But overall industrial output
unexpectedly rose thanks to strong oil and gas production, the
Office for National Statistics said.
The data were the first official figures to cover output
solely for the period after the June 23 Brexit vote. Britain was
plunged into political chaos in the weeks after the vote and
before the formation of a new government under Prime Minister
"I do think we were all a bit euphoric about the (PMI)
numbers," the head of currency trading at one large Asian bank
in London said. "They have seen the flash benefit from a
collapse in the currency but let's see what our economy looks
like in six or 10 months time."
He said sterling's tendency to move a full cent each day had
hurt bank traders trying to keep a limit through automatic
"stop-loss" orders on the amount of risk they are exposed to.
"I was blown out by the scale of the jump yesterday because
in this situation you have to have your stops in place," he
said. "You just have to downsize your position so you can ride
these bumps. But at least it's moving every day so you always
have a chance to catch some profit in the move."
Sterling has rebounded about 5 percent against the dollar
since hitting a three-decade low in July.
(Editing by Louise Ireland)