gbp fundamentals

British Pound Remains a Laggard as UK Industrial Output Hits 28-Year Low

Tuesday, 10 March 2009 21:02:56 GMT  |  Terri Belkas, Currency Strategist

The British pound was unable to stage any recovery and subsequently dropped for a test of 1.37 against the greenback during the afternoon. Economic news out of the UK was disappointing as UK industrial production fell more than expected a rate of 2.6 percent in January, dragging the annual rate down to a 28-year low of -11.4 percent from -9.3 percent. A bulk of the decline was due to contractions in output by manufacturers as businesses compensate for weak demand. This will likely be highlighted on Wednesday as well since the UK's trade balance is forecasted to reflect a wider deficit of 7.5 billion pounds in January from 7.367 billion pound in December as exports to the EU may have declined for the fourth straight month. The only real potential for the trade deficit to improve would be for imports to continue falling rapidly for the sixth straight month, as domestic demand wanes. Overall, if the trade deficit widens more than expected, the British pound could pull back in response as it would suggest that conditions in the UK are still deteriorating.

Related Article: British Pound Weekly Trading Forecast


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