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Sterling slips after UK industrial output falls sharply
December 7, 2016 / 9:54 AM / a year ago

Sterling slips after UK industrial output falls sharply

LONDON (Reuters) - Sterling posted its biggest slide in two months on Wednesday after poor British industrial output data added to a sense that a month-long recovery in the currency may have run its course.

A British pound note is seen in front of a stock graph in this November 7, 2016 picture illustration. Picture taken November 7. REUTERS/Dado Ruvic/Illustration

The pound fell 1 percent to a one-week low of 85.50 pence per euro EURGBP=D4, extending a slide triggered by another round of Brexit-related political turbulence late on Tuesday.

Against the dollar, it fell 0.6 percent to dip back below $1.26 after October output data showed the biggest monthly fall in four years.

The weak performance by manufacturers may raise doubts about how much of a boost factories are getting from the big fall in sterling since Britain voted in June to leave the European Union.

The monthly slide was largely attributed to a temporary shutdown of a major oilfield, but it fuelled speculation that economic data may finally be turning lower after proving more robust than many had forecast following the Brexit vote.

“We have had a slew of stronger-than-expected high-frequency data out of the UK, allaying some of the concerns (about the hit to the economy),” said Paresh Upadhyaya, head of currency strategy at Pioneer Investments in Boston.

“But today we got much weaker-than-expected numbers in the production data. Investment goods were particularly weak, and we did see cable get hit because of that.”

Like a number of other analysts, he put the past month’s rally in sterling, its best since 2009 against the euro, down mainly to profit-taking by some of the investors who had bet against the currency this year or since the Brexit vote.

“We’ve been short (on sterling) all year,” said Alessio deLongis, a portfolio manager with Oppenheimer Funds in New York.

“The day after the referendum, we brought the position back to neutral and then we gradually reinstated the short. Sterling is cheap, but there are good reasons for it to be cheap. If it moves towards the lows around $1.20-22 that would probably be a good place to take profit.”

Parliament was set to back Prime Minister Theresa May’s Brexit timetable on Wednesday, capping for now a rebellion in her Conservative Party over a lack of insight into the government’s strategy.

Editing by Larry King

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