UK Production Beats but Trade Balance Hurts

GBPUSD, Daily             

UK production figures for November beat expectations, with the headline industrial output reading rising 2.1% m/m and 2.0% y/y, up from -1.1% m/m and -0.9% y/y in revised data for October and the first positive readings in three months. The median forecasts had been for growth of just 0.6% m/m and 0.3% y/y. The reopening of the Buzzard oil field in the North Sea following a down period for maintenance boosted the industrial figure, though the narrower manufacturing production gauge (which excludes mining and quarrying, forestry and agriculture) also smashed forecasts. Manufacturing output came in with growth of 1.3% m/m and 1.2% y/y, up from -1.0% m/m and -0.5% y/y in October. The median forecasts were again well off the actual outcomes. The encouraging production data were offset by an unexpected construction output and November trade data showing a GBP 3.3 bln leap in imports, which dwarfed a GPB 700 mln rise in exports, leaving the trade deficit at a much wider than forecast GBP 4.2 bln. The trade data evidences that the weaker pound won’t be a one-way street. The pound tipped about 50 pips lower versus the dollar after an initial pop in the immediate wake of the data releases. Cable spiked to the low seen earlier in the week at 1.2106, (a May 1985 low), my short term target remains sub 1.2100 at 1.2080.  Sterling continues to be the weakest of the majors this morning, with NZD being the strongest performer.


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Stuart Cowell

Market Analyst


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