Four out of four measures of the UK industry missed: manufacturing production dropped by 0.2% m/m instead of a rise of 0.1% expected. Year over year it fell 1.7% instead of 1.4%. The wider industrial output figures plunged by 1.1% against only -0.1% predicted and y/y, a rise of 1% expected was met with a drop of 0.4%.
GBP/USD did slide in the immediate aftermath, but this didn’t last. Is sterling accumulating bad news that will eventually hit it hard?
Manufacturing was always the weakest link in the economy, as also seen in the purchasing managers’ indices. This isn’t unique to the UK: also in the US, manufacturing is seen as already in a recession. Worries about the Chinese industry weigh on global markets and even Germany’s locomotive is somewhat moving slowly.
Nevertheless, this is yet another significant disappointment to end 2015, and 2016 does not seem much better so far. The pound also remains under pressure due to the BOE’s heavy hand.
GBP/USD is certainly off the highs, inspired solely by the greenback’s weakness last week, and trading around 1.45. Support awaits at 1.4365 followed by 1.4230. Resistance is at 1.4650.
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