Forex News – Sterling falls after weak UK manufacturing data

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Sterling dropped against the dollar and euro after UK manufacturing output unexpectedly fell despite forecast for a slight rise in February. This raised concerns about the health of the UK economic recovery and whether the UK will avoid falling into a recession.

The UK Office for National Statistics said that factory output in Britain dropped by 1.0 percent in February after a January’s figures were revised downwards to show a drop of 0.3 percent, giving an annual decline of 1.4 percent. This was the biggest monthly drop in a year. Forecasts were for a slight increase of 0.1 percent.

Today’s data come as a blow to recent PMIs had shown an improving manufacturing sector. March  factory PMI jumped to a 10-month high.  Construction and services PMIs also increased, sending the pound to a 4-1/2 month high against the dollar.

GBPUSD fell today after the manufacturing output data to 1.5866 around 08:30 GMT from 1.5894 where it was trading before the news.

The focus turns to the Bank of England policy meeting later today at 11:00 GMT.  The central bank is expected to maintain its current rate at 0.5 percent and not expand quantitative easing.