Pound (GBP) Softened by Poor Production Figures
UK manufacturing and industrial production data for December has disappointed today, showing a much larger decline in sector output than anticipated. Only month-on-month (MoM) Manufacturing Production performed above forecast, showing a -0.2% drop in activity rather than a -0.3% drop, after a 0.1% rise in November. Year-on-Year (YoY) Manufacturing Production dropped -1.7%, -0.5% more-than-expected.
Regardless, the Pound Sterling to Euro exchange rate is currently advancing 0.8%.
UK Trade Balance Deficit Betters Estimates but Pound (GBP) Weakens
The UK Trade Balance figures have mostly printed above-forecast, repeating the performance of the BRC Like-For-Like Sales data earlier. Both the Visible Trade Balance and the Total Trade Balance fell further than expected, with the overall trade deficit dropping by more than -£1.3 billion. Despite this, Pound Sterling has given up earlier gains to fall -1.1% against the Euro after the UK’s total trade deficit for 2015 was revealed to be the biggest ever recorded.
The day’s only Eurozone releases have mostly printed poorly, strengthening the Pound Sterling to Euro (GBP/EUR) exchange rate. Meanwhile, strong retail sales figures have bolstered Pound Sterling (GBP) ahead of key trade balance data due out later today.
Above-Average Sales Figures Boost GBP/EUR Exchange Rate Ahead of Trade Balance Data
The British Retail Consortium (BRC) has released its figures for January’s Like-For-Like Sales, showing a significant improvement upon the previous month. The final result of 2.6% far outpaces the 0.3% forecast and is significantly higher than both the quarterly average (1.6%) and the yearly average (1.9%). All categories apart from food saw growth, although even with a slight decline the short and long-term averages for foodstuffs remained the same. In good news for inflation, it seems that the rise in sales was driven by big ticket items, with furniture performing the best. Sales of Non-Food products online saw a 14.9% increase year-on-year (YoY).
Helen Dickinson OBE, Chief Executive of the BRC, explains ‘Following on from a somewhat disappointing Christmas period for retailers, the New Year kicked off to a strong start, with 3.3 per cent growth across all product categories and 2.6 per cent growth on like-for-like sales. This was the best performance for retailers since September and ahead of the three and twelve month averages.’
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2913.
Euro to Pound Sterling (EUR/GBP) Exchange Rate Soft on Disappointing German Trade and Production Data
All the Eurozone data for the day has already been released and investors aren’t too happy with the figures. While the German Trade Balance and Current Account both remained firmly in positive territory, the Trade Balance fell more-than-expected, dropping from €20.5 billion to €18.8 billion, with the Current Account undershooting its forecast rise by more than -€1 billion.
Industrial Production figures were also a disappointment, falling at a seasonally adjusted -1.2% month-on-month (MoM) when a 0.5% rise was forecast. YoY Industrial Production fell -2.2%, almost four times the rate of contraction forecast. Further compounding the negative tone of the data was the fact that, on a seasonally adjusted basis, the fall in exports significantly outpaced the fall in imports, with MoM drops of -1.6% and -0.5% respectively in December.
In other Eurozone news, the French Budget Balance deficit has shrunk from -€82.8 billion to -€70.5 billion, despite having been forecast to fall by around -€15 billion.
The Euro to Pound Sterling (EUR/GBP) exchange rate is currently trading between 0.7729 and 0.7787.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast: UK Trade Balance Data on Tap
There is no Eurozone data left to be released for the rest of the day. The UK has Trade Balance data on tap, which is predicted to show a mild improvement overall, although the Non-EU balance is forecast to creep up from £2.45 billion to £2.50 billion.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trading between 1.2832 and 1.2937.