DailyFX.com -

Talking Points:

  • UK Industrial Production (MoM) (Jun): 0.3% Actual Vs 0.6% Estimated; -0.6% Prior.
  • UK Industrial Production (YoY) (Jun): 1.2% Actual Vs 1.5% Estimated; 2.3% Prior.
  • GBP/USD Hits A Fresh Day Low To Trade At 1.6821; BoE Policy Meeting Looms Ahead.

Want to trade with proprietary strategies developed by FXCM? Find out how here.

UK Industrial Production year-on-year, which measures the manufacturing output of the energy sector, factories, and mines, decelerated to 1.2 percent in June from 2.3 percent in May. This short-term indicator for the strength of UK industrial activity missed market expectations of 1.5 percent. Moreover, the month-on-month print registered at 0.3 percent in June, which was an acceleration compared to the prior month reading of -0.6 percent. However, it fell short of market’s forecast of 0.6 percent. This data can be important as uncontrolled levels of production and consumption can spark inflation, which eventually leads to monetary tightening.

Before the data release, the British Pound grinded lower against the US Dollar as it traded firmly above the psychologically significant 1.6800 level. Immediately after the data release, GBP/USD plunged to hit a fresh day low of 1.6821. This worst-than-expected industrial production figures adds to an increased deterioration relative to expectations in the UK data flow since late February. This may suggest that analysts have over-estimated the health of the UK economy and opened doors for a downward surprise for the British Pound says DailyFX Currency Strategist Ilya Spivak.

Glancingahead, the focus for the British Pound will turn to the high-profile Bank of England Rate (BoE) Decision, which is due on Thursday 11:00 GMT (Aug 7th). The general consensus is for the BoE to leave their interest rate on hold at 0.50 percent, a rate cut from 1 percent since February 2009. The BoE is also expected to report its mammoth £375 billion of asset purchases for the month of August.

For traders that respects technical analysis, Ilya Spivak mentions near-term support to rest at 1.6818-22 (38.2% Fib Ret.) and support-turned-resistance at 1.6935. He remains opportunistic to get short at a more attractive entry level rather than a trade-able rally. Meanwhile according to DailyFX Speculative Sentiment Index, the ratio of long to short positions in the GBP/USD stands at 1.27 as 56 percent of FXCM Retail Forex traders are long the cable.

GBP/USD 5 Minute Chart

GBP/USD Plunges After UK Industrial Production And Before BoE Meeting

Daily Chart - Created Using FXCM Marketscope 2.0, Volume Indicator Available Here

New to FX? START HERE!

Edward Hyon, DailyFX Research Team

Keep up to date on event risk with DailyFX Calendar

Related Articles
  1. Forex Education

    Four Currencies Under the Spotlight in 2016

    With currencies having become the “tail that wags the dog,” in terms of their impact on the global economy, these four currencies will be under the spotlight in 2016.
  2. Forex Fundamentals

    These Currencies Are The Biggest Losers Of The Stock Downturn

    Here’s a list of the hardest-hit currencies amid the global stock market mayhem.
  3. Forex Strategies

    Will the Euro Continue to Rally? (EUO)

    The euro is rallying. Should investors chase this performance or is the real opportunity on the other side of the trade?
  4. Investing News

    China’s Forex Reserves Dropped Significantly

    China’s forex​ reserves dropped by a record $93.9 billion at the end of August to $3.56 trillion because the Central Bank has been selling dollars to provide a cushion to the falling yuan​
  5. Forex

    The Pros and Cons of a Fully Convertible Rupee

    Amid the rising economic power of India, the talks of making the Indian currency fully convertible are gaining momentum. We look at the pros and cons.
  6. Forex Fundamentals

    Chinese Yuan an Unlikely Reserve Currency

    As the world's second largest economy, China's challenge to America’s dominance includes a push to make the yuan (RMB), the world’s reserve currency. Whether it can do that now is unclear.
  7. Economics

    How Currency Enforcement Helped Sink The Trans-Pacific Partnership (TTP)

    One particular barrier to trade that has received much attention of late and caused delays in negotiations of the TPP is exchange-rate manipulation, by which a country artificially devalues its ...
  8. Forex

    Top U.S Forex News Sites

    Breaking news moves forex markets. Here are the top U.S. sites for tracking forex news.
  9. Investing

    Financial News Comparison: Bloomberg Vs. Reuters (BAC, GOOG)

    Access to financial information has grown with the expansion of digital news. Bloomberg and Thomson Reuters lead the pack, claiming a majority of the business information market.
  10. Economics

    Who Benefits From South Korea's Lowered Interest Rates?

    South Korea is the latest country to cut interest rates in an attempt to stimulate economic growth.
Hot Definitions
  1. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  2. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
Trading Center