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.