Sterling was undermined by very weak industrial data and a dip in the monthly GDP data.
The dollar secured a reprieve on Monday as the lifting of an immediate threat to impose tariffs on Mexican exports eased fears over the US economic outlook.
US bond yields recovered ground after last week’s sharp losses while equity markets made net gains despite underlying unease over US-China trade relations. Demand for the yen eased slightly as equities secured net gains.
Sterling was undermined by very weak industrial data and a dip in the monthly GDP data. Precious metals were undermined by a stronger dollar and improved risk conditions.
OPEC policy doubts were a factor curbing support for oil prices. The Norwegian krone dipped sharply after weaker than expected inflation data.
UK industrial production data was much weaker than consensus forecasts with a 2.7% decline for April as a slump in car output triggered a 3.9% drop in manufacturing output. There was an annual production decline of 1.0% which contributed to a sharp 0.4% decline for monthly GDP and held the quarterly gain to 0.3%. Although weak car output had already been released, the data reinforced a lack of confidence in the growth outlook and pushed Sterling weaker. The NIESR also indicated that GDP would decline 0.2% for the second quarter which undermined sentiment.
GBP/USD dipped to lows near 1.2650 before a gradual recovery while GBP/EUR continued to slide towards 1.1200.
Bank of England MPC member Saunders stated that the neutral rate was for UK rates is around 2.0% and that the central bank will likely need to return to a neutral policy stance sooner than expected by the market. He also commented that the committee does not necessarily need to keep rates on hold until Brexit uncertainties are resolved. Sterling sentiment remained fragile after the poor data and GBP/USD traded around 1.2680 on Tuesday with GBP/EUR near 1.1200.
|09:30||GBP Average Earning Including Bonus(APR)||3.40%||3.20%|
|09:30||GBP Claimant Count Change(M/M)(MAY)||-||24.7K|
|09:30||GBP Unemployment Rate(APR)||3.90%||3.80%|
|10:00||BoE MPC Member Michael Saunders||-||-|
|10:00||BoE MPC Member Silvana Tenreyro Speech||-||-|
|10:00||GBP BoE Ben Broadbent Speech||-||-|
|13:30||USD PPI Ex Food & Energy (Y/Y)(MAY)||2.50%||2.40%|
|13:30||USD PPI Ex Food & Energy (M/M)(MAY)||0.20%||0.10%|
|13:30||USD PPI (Y/Y)(MAY)||2.30%||2.20%|
|13:30||USD PPI (M/M)(MAY)||0.20%||0.20%|
|23:45||NZD Electronic Card Retail Sales (Y/Y)(MAY 15)||-||4.50%|
|23:45||NZD Electronic Card Retail Sales (M/M)(MAY 15)||-||0.60%|