GBP/USD Rallies on Upbeat UK Economic Data
- UK manufacturing and construction data point to a more buoyant UK economy.
- That’s helped lift the Pound and made an interest rate increase more likely.
UK industrial production, construction output and manufacturing were all buoyant in August, suggesting that the Bank of England remains on course to increase interest rates later this year, helping boost the Pound for a second day in a row after its recent sharp selloff.
Construction output jumped by 0.6% month/month in August after dropping the month before, comfortably beating expectations of an unchanged figure. Manufacturing output grew 0.4% month/month, twice the predicted increase, and industrial production was up by the forecast 0.2% month/month. That left the international trade figures as the only fly in the ointment, with the deficit on trade in goods climbing to a record high £14.24 billion whereas a drop to $11.2 billion had been predicted.
The latest official statistics contrast with the purchasing managers’ indexes for the UK manufacturing and construction sectors released last week, which proved disappointing, and helped lift GBP/USD for the second successive day after its recent sharp losses.
Chart: GBP/USD Five-Minute Timeframe (October 10, 2017)
The data also increased the chances of a UK interest rate increase by the Bank of England at the next meeting of its rate-setting monetary policy committee on November 2, despite the continuing lack of progress in the Brexit talks that has put the Pound on the back foot. However, a rate rise is still not nailed on as figures for the much bigger services sector are due to be released on October 25, along with a preliminary first estimate for third-quarter gross domestic product growth, little more than a week before the BoE’s November announcement.
Earlier Tuesday, the British Retail Consortium also released some upbeat figures, reporting that UK retail sales grew by 1.9% year/year in September, up from the prior month’s 1.3%.
--- Written by Martin Essex, Analyst and Editor
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