British Pound Sterling | Currency News Views and Outlook

British Pound edges higher vs EUR and USD; Was yesterday's good industrial data worth getting excited about?

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Category: British Pound Sterling

Published on Friday, 10 February 2012 11:03

Written by Rob Samson

The pound euro exchange rate is 0.29% higher on the day with 1 GBP = 1.1936 EUR. The pound US dollar exchange rate is 0.11% higher with 1 GBP = 1.5836 USD. The Pound Australian dollar exchange rate is 0.99% higher with 1 GBP = 1.4805 AUD. (Click here for the latest live pound exchange rates.)

As expected, the Bank of England delivered an additional GBP50bn in the quantitative easing programme.

In the statement, Governor King noted that there were some more positive signs and a gradual strengthening of output should be supported by a gentle recovery in household real incomes but issues in the Eurozone remain the big concern.

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He also referred to the continued credit squeeze in the UK domestic market.

The pound earlier found some support from better than expected trade and industrial production data and the reaction to the QE announcement was relatively
muted.

UK December industrial output rose +0.5% m/m vs +0.2% consensus.

Looking at the industrial output data, a morning exchange rate note from UBS says:

"Our UK economist notes that the outperformance was driven by manufacturing output, which jumped 1% on the month - higher than the 0.2% expected by markets. UK December trade data also beat expectations, with the deficit at GBP7 bn vs GBP8.6 bn cons and GBP8.9 bn last. Our economist notes that this is December data and we already have the preliminary Q4 GDP print. Normally, a big surprise in the monthly print raises the scope for a revision to the GDP outturn, but the ONS has stated that the impact of the IP data on GDP is small."

Elsewhere, The ECB leaves interest rates at 1.00% in line with expectations, though there was no clue as to a March rate cut.

The tone of ECB President Draghi’s press conference altered expectations of a rate cut in March towards the likelihood of non-standard measures to ease financial conditions in the eurozone.

Focus at the end of the month will be on the second round of cheap ECB loans (QE through the back door), which should smooth credit conditions further. The 1.00% eurozone base rate is now expected to remain for the foreseeable future.

The euro is trading down at $1.3250 vs the US dollar this morning as the market remains nervous over the Greek situation. The euro may remain under pressure today.