Pound sterling falls after mixed UK industrial statistics.
The Pound Sterling (GBP) is under pressure after the UK Office for National Statistics (ONS) released mixed industrial statistics for November. Monthly manufacturing growth was marginally higher. But yearly results fell short of expectations. Overall economic data was marginally better than expected. But it appears incapable of dispelling fears of a technical recession in the UK economy.
In the future, the Pound Sterling will be guided by labor market. And inflation indicators are set to be released the following week. Cooling labor market conditions and further declines in price pressures will heighten expectations for the Bank of England (BoE) to publish. A dovish interest rate forecast in its first monetary policy announcement of 2024 on February 1.
Despite a 0.3% increase in November GDP, the UK economy is set to enter a technical recession.
Meanwhile, the Pound Sterling’s near-term demand is buoyant due to better market confidence. Despite a sticky United States Consumer Price Index (CPI) report for December. The GBPUSD pair remains on a bullish track as odds of a Federal Reserve (Fed) interest rate drop remain strong.
Daily Market Movers: Pound Sterling falls as the US Dollar strives to recover.
The pound has given up intraday gains after the United Kingdom ONS released mixed industrial statistics for November.
Manufacturing Production increased on a monthly basis. by 0.4% versus 0.3% expected – it contracted by 1.2% in October. On an annual basis. The economy grew at a slower rate of 1.3%, compared to projections of 1.7%. But notably beat the previous figure of 0.2%.
Monthly Industrial Production increased by 0.3%, as expected, after falling by 1.3% in October. The annual manufacturing data unexpectedly fell by 0.1%, despite investors expecting a 0.7% increase. Previously, the data point showed a 0.5% decline.
Monthly GDP increased by 0.3%, compared to 0.2% expected. In October, the UK economy dropped by 0.3%.
The economic data is insufficient to give market investors confidence that the UK economy will avoid a technical recession in the fourth quarter of 2023. It will be difficult for Bank of England (BoE) policymakers to choose between greater inflation and a weak economic outlook.
While no discussions regarding rate cuts have occurred among BoE policymakers, investors believe the central bank will drop borrowing costs this year to avoid ‘over-tightening’ effects.
The Pound Sterling will be influenced next week by the November labor market and December inflation data, which will set the tone for the monetary policy meeting in February.
Investors will take action based on the US PPI, UK labor market, and inflation statistics.
The UK labor market is rapidly cooling, with firms posting 32% fewer job openings in December than a year ago. According to the Recruitment and Employment Confederation (REC), permanent jobs would be in short supply by 2023.
The demand for risky assets is increasing, while the US Dollar Index is declining. (DXY) has retreated to its critical support level of 102.30.
The USD Index fails to gain on persistently high inflation statistics as bets on a Federal Reserve (Fed) rate cut remain robust.
Gains made following the release of the USD Index’s inflation data were given up. As core inflation continued to drop although headline inflation surged rapidly, and Fed policymakers normally evaluate core CPI data when making decisions.
The USD Index will experience movement in today’s session. Following the release of the United States Producer Price Index (PPI) data for December. Which will be published at 13:30 GMT.
