The Great Britain pound turned down today as economic indicators came out much worse than was expected, prompting the British Chamber of Commerce to talk about necessity for the Monetary Policy Committee to delay interest rate increases. The currency recovered against some of its peers, including the US dollar and the euro, but remained soft versus the Japanese yen.
It was expected that this week’s macroeconomic reports would be supportive for the sterling, but such outlook turned out to be wrong. Manufacturing production fell 1.3 percent in May, while industrial production dropped 0.7 percent. Analysts have expected growth of 0.4 percent and 0.3 percent respectively.
David Kern, Chief Economist at the BCC, commented on the data:
This reinforces the arguments for the MPC to delay increases in interest rates until it becomes absolutely necessary. The recovery must be given time to consolidate and gather more momentum. The risks to the economy of premature increases in rates are much greater than the risks of waiting a little longer.
GBP/USD traded near the opening level of 1.7126 as of GMT after dropping to 1.7085. EUR/GBP was near the opening of 0.7943 after the rally to 0.7960. GBP/JPY declined from 174.43 to 173.96.
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