Sterling slips after UK industrial data misses forecasts
Sterling pared early gains against the dollar on Friday after data showed British industrial production and construction unexpectedly contracted in November, bolstering the view that economic growth is moderating. Industrial output fell by 0.1 per cent on the month in November, extending October's decline. A Reuters poll had forecast a 0.2 per cent rise, month-on-month, and a 1.6 per cent rise annually. Construction output dropped by 2 per cent on the month. Friday's data added to signs that Britain's economic recovery may be losing steam. That view has already prompted investors to push back expectations of when the Bank of England (BoE) will start to raise interest rates to next year. Six months ago, many expected a move before the end of 2014. Sterling slipped to $1.5125 from around $1.5145 before the two sets of data, still up 0.2 per cent on the day. The pound hit a 18-month low of $1.5034 on Thursday and was on track for its fourth straight week of losses against the dollar. The euro was down 0.1 per cent at 78.10 pence, having traded at 77.99 pence before the data was released. "Construction and industrial data are a further indication that domestic momentum is slowing," said Jameel Ahmad, chief market analyst at FXTM. "This follows services, manufacturing and construction PMIs showing a slowdown in activity. That will further push back any pressure on the BoE to raise interest rates." Adam Cole, head of G10 FX strategy at RBC Capital Markets, said the industrial production numbers combined with the weak construction output posed a downward risk to Britain's fourth-quarter gross domestic product.
Dollar slips vs yen on risk aversion, euro fragile
The dollar slipped against the safe-haven yen on Tuesday as investor risk aversion mounted on the back of a sharp drop in equities. The battered euro caught some relief as the dollar stumbled against the yen, helping the common currency pull back a bit from a nine-year trough. Persistent weakness in oil prices and uncertainly over the Greek political situation have spooked investors, sending Wall Street to its biggest one-day fall in about three months. As the region's equities floundered -- Tokyo's Nikkei sank 3 per cent -- the resulting flight to safety drove investors into the yen. As a result, the dollar dipped to as low as 118.65 yen from Monday's high of 120.68, moving further away from a seven-year peak of 121.86 set last month. A sharp fall in US Treasury yields also undermined the dollar versus the yen, with 10-year yields diving 14 basis points in just two sessions. "The dollar/yen surge late last month that ignored some weak US data was overdone, it was led by sentiment and not based on solid factors. So it's natural for players to adjust positions when faced by lower oil and tumbles in European, US and now Japanese equities," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo. "But the key theme of monetary policy divergence remains
firmly in place, and I don't see the dollar declining much more against the yen," Murata said. The euro last traded at $1.1961, up 0.3 per cent, after dipping into the $1.1860 area on Monday, reaching depths not seen since early 2006. The euro's bounce, however, is expected to be limited as the prospect of more policy easing from the European Central Bank has grown ever stronger. Adding pressure on the ECB to do more, German inflation slowed to its lowest in over five years in December. The data came just days after ECB President Mario Draghi said the risks were growing that inflation would stay too low for too long.
Sterling pared early gains against the dollar on Friday after data showed British industrial production and construction unexpectedly contracted in November, bolstering the view that economic growth is moderating. Industrial output fell by 0.1 per cent on the month in November, extending October's decline. A Reuters poll had forecast a 0.2 per cent rise, month-on-month, and a 1.6 per cent rise annually. Construction output dropped by 2 per cent on the month. Friday's data added to signs that Britain's economic recovery may be losing steam. That view has already prompted investors to push back expectations of when the Bank of England (BoE) will start to raise interest rates to next year. Six months ago, many expected a move before the end of 2014. Sterling slipped to $1.5125 from around $1.5145 before the two sets of data, still up 0.2 per cent on the day. The pound hit a 18-month low of $1.5034 on Thursday and was on track for its fourth straight week of losses against the dollar. The euro was down 0.1 per cent at 78.10 pence, having traded at 77.99 pence before the data was released. "Construction and industrial data are a further indication that domestic momentum is slowing," said Jameel Ahmad, chief market analyst at FXTM. "This follows services, manufacturing and construction PMIs showing a slowdown in activity. That will further push back any pressure on the BoE to raise interest rates." Adam Cole, head of G10 FX strategy at RBC Capital Markets, said the industrial production numbers combined with the weak construction output posed a downward risk to Britain's fourth-quarter gross domestic product.
The dollar slipped against the safe-haven yen on Tuesday as investor risk aversion mounted on the back of a sharp drop in equities. The battered euro caught some relief as the dollar stumbled against the yen, helping the common currency pull back a bit from a nine-year trough. Persistent weakness in oil prices and uncertainly over the Greek political situation have spooked investors, sending Wall Street to its biggest one-day fall in about three months. As the region's equities floundered -- Tokyo's Nikkei sank 3 per cent -- the resulting flight to safety drove investors into the yen. As a result, the dollar dipped to as low as 118.65 yen from Monday's high of 120.68, moving further away from a seven-year peak of 121.86 set last month. A sharp fall in US Treasury yields also undermined the dollar versus the yen, with 10-year yields diving 14 basis points in just two sessions. "The dollar/yen surge late last month that ignored some weak US data was overdone, it was led by sentiment and not based on solid factors. So it's natural for players to adjust positions when faced by lower oil and tumbles in European, US and now Japanese equities," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo. "But the key theme of monetary policy divergence remains
firmly in place, and I don't see the dollar declining much more against the yen," Murata said. The euro last traded at $1.1961, up 0.3 per cent, after dipping into the $1.1860 area on Monday, reaching depths not seen since early 2006. The euro's bounce, however, is expected to be limited as the prospect of more policy easing from the European Central Bank has grown ever stronger. Adding pressure on the ECB to do more, German inflation slowed to its lowest in over five years in December. The data came just days after ECB President Mario Draghi said the risks were growing that inflation would stay too low for too long.
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