Industrial production props up GBP

Yesterday’s UK economic calendar was a busy one; both month-on-month and year-on-year industrial production and manufacturing production figures were released. Both manufacturing figures fell short of the consensus levels, however, the pound was propped up and protected from losing ground by very bullish industrial production readings that far surpassed the majority of analysts’ expectations. The rise in British industrial output can be linked a surge in oil, while production and manufacturing took a hit on the back of a decline in the pharmaceutical industry. Later in the day, the NIESR GDP estimate was unveiled at 0.6%, the fastest growth rate seen since January, backing up the fact that Britain’s economic growth has picked up over the last three months after a fairly poor first quarter. Despite the poor manufacturing figures, the pound was able to gain against both its major counterparts; against the euro the pair traded in a 180 pip range with lows of 1.3577 (IB) and topped out at 1.3759 (IB). Against the dollar, a very similar story as the pair traded in a 185pip range and broke through the resistance level of 1.5464 (IB) and posted recent highs of 1.5553 (IB). There is very little to keep an eye out for as the week comes to a close; we have to look into next week when both core consumer price index and consumer price index figures are released, of course, seen as top tier data, and any deviation from the consensus reading will bring great volatility to the markets.

Unlike the UK, there is very little to report on in terms of economic releases from within the bloc. This, of course, does not mean that Greece wasn't able to steal a headline or two. The majority of headlines suggested that Greece are on a path that only leads to default. Aid from their bailout programme has, of course, been frozen and it is believed that the government has used the last of its cash to pay public sector wages and pensions. Yesterday the European Commission said the latest Greek reform proposal to unblock and enable fresh lending was not what was agreed with creditors last week and they would simply wait on a fresh reform to come out of Athens. As mentioned earlier in the report, the euro lost ground against the pound and closed play above the 1.37(IB) level. Against the dollar the euro recorded a small daily gain of just 0.1% despite trading in a 124 pip range. Again, just like the UK economic calendar, there is very little to report on as the week comes to an end. Next week brings inflation data out of the bloc and all participants will be following any developments out of Greece as the 30th looms ever closer.

Yesterday was another difficult day for the dollar as it lost out to a basket of currencies. Following a positive day of data out of the UK, the majority of these losses were seen against the pound as rates managed to squeeze back up to mid-1.55 levels at the interbank. Against the euro, following some sharp losses in recent days, the dollar pushed and pulled around the 1.13 interbank levels to finally close just underneath. The only discernible release out of the US yesterday came in the form of the monthly budget statement after hours. Figures beat expectations as the trade deficit continued to contract for the 2nd month running ahead of a very negative Q1. This may have had a hand in the reversal we saw on the Sterling/dollar rate overnight. Today will hold a busier afternoon for the Greenback with a plethora of data releases out just after midday, with retail sales being the most closely watched we will also have additional labour market and business inventories figures, all with potential to move the market.