GBP Drops As UK Manufacturing Loses Steam

The pound fell to the lowest level in more than a year against the dollar after a report showed U.K. manufacturing growth unexpectedly slowed last month, reducing pressure on the Bank of England to raise interest rates.

Sterling weakened a second day versus the euro after the data based on a survey of purchasing managers showed overseas orders stagnated, highlighting Britain’s dependency on domestic demand. Short-dated government bonds outperformed their longer-maturity peers as investors scaled back bets on a rate increase after European Central Bank President Mario Draghi said he can’t exclude the risk of deflation in the euro area, Britain’s biggest trading partner.

“The pound fell today as the manufacturing PMI report was consistent with the latest trend in the U.K. data showing recovery but at a declining pace compared with market expectations,” said Athanasios Vamvakidis, head of Group-of-10 currency strategy at Bank of America Corp. in London. “U.K. data is still good. But given that inflation is also below expectations, we expect the BOE to take its time before raising interest rates.”

The U.K. currency dropped 1 percent to $1.5424 at 12:37 p.m. London time after sliding to $1.5413, the lowest since August 2013. Sterling depreciated 0.5 percent to 78.08 pence per euro after strengthening 6.5 percent against the common currency last year.

Wagers by hedge funds and other large speculators on the pound’s decline against the dollar exceeded those on a gain by 15,233 contracts in the week through Dec. 23, the first increase in three weeks.

via Bloomberg

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.