Strong Manufacturing Production Temporarily Breathes Fresh Wind Into Cable

By Benjamin Spier,

THE TAKEAWAY: UK manufacturing production beats analysts’ expectations, rises 0.9% -> Industrial production for March falls 0.3% as expected -> Markets dropping ahead of BoE release later today

UK manufacturing production rose 0.9% during the month of March, beating analysts’ expectations of a 0.5% rise. Compared to March 2011, manufacturing fell 0.9%. Meanwhile, March industrial production fell 0.3% as expected; compared to last year, industrial production was down an expected 2.6%, the Office for National Statistics said today.

Chemicals, transport equipment and electronics led the manufacturing rise. The better than expected March manufacturing followed a 1.1% decline in February due to freezing temperatures. Upcoming manufacturing production remains uncertain as government spending cuts lowers consumer spending and the Euro crisis affects the demand for UK exports.

The dip in industrial production is attributed to the lack of demand for energy and oil as March was unseasonably warm in the UK.

This data comes right as the BoE will announce possible changes in its bond-purchasing plan or cuts to the interest rates. The UK has entered a double dip recession for the first time in decades, and a change of policy in either area could provide a stimulus to the economy. However, analysts expect both the interest rate and the asset purchase target to remain unchanged. A cut in interest rates or a greater than expected asset purchasing target would be negative for sterling.

It’s been an overall rough session for cable, as a weekly downtrend has continued below 1.6100. There was an initial bounce following the better than expected industrial production, but the gain was quickly reversed, possibly on speculation before the BoE announcement. Following an earlier rise this morning, EUR/GBP remained steady after the production release.
DailyFX is the forex news and research arm of FXCM, Inc (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

Original Article: http://www.dailyfx.com/forex/market_alert/2012/05/10/Strong_Manufacturing_Production_Temporarily_Breathes_Fresh_Wind_into_Cable.html

DailyFX is the forex news and research arm of FXCM (NYSE: FXCM), which provides currency trading and brokerage services and is an advertiser on TheStreet websites. Any opinions, news, research, analyses, prices, or other information is provided as general market commentary, and does not constitute investment advice. Dailyfx will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information. Currency trading involves significant risk of loss. Individual authors may hold positions in the currencies discussed in the article.

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