Market players are unsure whether to throw Sterling a lifeline or to punish the currency further on Thursday, following the mixed bag of different economic releases from the United Kingdom. Total industrial production exceeded expectations by rising 0.5% in June but manufacturing remained flat. The trade deficit unexpectedly widened, which weighed on sentiment.
With the UK economy ending the second quarter on a soft note, and with disappointing manufacturing data, speculation around the Bank of England raising UK interest rates this year is likely to weaken even further. Although it has been over one year since Britain voted to leave the European Union, it’s remarkable how the deteriorating economic fundamentals are now starting to shine through and continue to suggest that the nation is struggling to shake off the Brexit blues.
The British Pound is still struggling to nurse its wounds, following the sharp sell-off in Sterling last week, after the Bank of England (BoE) doves crashed the party, in August’s monetary policy meeting. The economic data from the UK is not complimenting prior hints from the BoE, that UK interest rates could be raised, which is seen as a threat that may limit buying sentiment.
Sterling bears still seem to be in control of the Pound, following the inspiration they received after the downgrade in economic forecasts from the BoE. This coupled with the weakening optimism of a UK interest rate rise seems to indicate that the Pound could still drop lower. From a technical standpoint, the British Pound/U.S. dollar (GBP/USD) currency pair remains under pressure on the daily charts. A weekly close below 1.3000 should encourage a further depreciation towards 1.2850.