fundamental alert

U.K. Manufacturing Disappoints, Industrial Production Slips to Three Year Low But Pound-Dollar Continues to Hold Ground (Update)

Tuesday, 07 October 2008 08:44:42 GMT  |  David Song, Currency Analyst

Industrial production in the U.K. fell another 2.3%, which was well beyond the 2.0% decline projected by economists, and marks the biggest decline in three years. Meanwhile, manufacturing activity fell for the sixth consecutive month to -1.9% in August, signaling that Europe’s second largest economy may have slip into a recession as the downturn in the economy accelerates. The housing and credit crisis paired with instability in the financial market has clearly becoming a growing concern for the U.K., and may push the BoE to lower their benchmark interest rate this week as growth prospects deteriorates. The pound-dollar (GBPUSD) however, showed a muted reaction to the disappointing U.K. data. Cable is off its 1.7322 lows and changes hands close to 1.7385, while EUR-GBP is supported ahead of 0.7800 after hitting 0.7812 highs. Meanwhile, a banking industry source said the British government and bank will discuss the structure of any recapitalisation over the next couple of days. U.K. banks have been keen to play down U.K. banking funding speculation, with Barclays denying its asked for assistance, while RBS declined comment. U.K. bank shares slumped after earlier speculation, which emanated from a BBC blog from business editor Robert Peston.

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