Downside risks continued to weigh on the pound yesterday following weaker than expected industrial and manufacturing production figures, suggesting that the UK could be headed for a triple dip recession.
Figures from the Office of National Statistics revealed that in January, manufacturing output dropped by 1.5% and industrial production fell by 1.2%; well below the market expectations. The data, which once again highlights that the UK economy is struggling, will put pressure on the Bank of England to inject more stimulus, potentially in the form of further quantitative easing – which would cause the pound to weaken further.
Later on in the day, the National Institute of Economic and Social Research estimated that the UK economy contracted by 0.1% over the three months to February and revised their estimate for the first quarter of 2013 to show a contraction of 0.2% - which doesn’t make for good reading.
Elsewhere, the euro drew support after European Central Bank council member Jens Weidmann commented that the euro’s current value isn’t a threat to the economy and is in fact in line with the fundamental economic data in the euro zone. The euro strengthened against the US dollar by 0.6 cents following the news and strengthened against the pound by 0.4 cents.
The only notable data due for release today will be February’s retails sales figures from the US. A better than expected figure from the US could cause the US dollar to strengthen further on expectations that the US Federal Reserve may look to scale back their current stimulus programme.
10.00am – EUR – Industrial Production (YoY) (Jan): Expected to improve to -2.2%.
12.30pm – USD – Retail Sales (MoM) (Feb): Expected to improve to 0.5%.
18.00pm – USD – Monthly Budget Statement.
20.00pm – NZD – RBNZ Interest Rate Decision: Expected to remain at 2.5%.