THE TAKEAWAY: UK industrial production drops -> Speculation that BoE may change stimulus package -> Cable comes of early session climb
Industrial output in the UK dropped to -0.7% in October from September’s. Economists had predicted a smaller drop to -0.3%. The yearly number was -1.7% versus the expected -0.7%, and the modified previous -1.5% (from -0.7%). The correlated manufacturing production statistic saw similar drops.
Manufacturers in the UK have suffered as the European sovereign debt crisis continues to cut demands for British exports. The Bank of England is scheduled to meet tomorrow to discuss its asset purchase program, which it recently expanded by 75 billion Pounds. Minutes from previous BoE meetings have showed support for further quantitative easing measures; however, the general consensus among economists is that tomorrow’s meeting will result in an unchanged stimulus package.
The Pound has dropped versus the Dollar and Euro after climbing to a session high earlier in the day. Intraday options remain unclear and in the longer term we continue to predict continued Pound weakness as global risk sentiment cools.