The British Pound sank to an almost five year low against the dollar, weighed down by lackluster economic data and the uncertainty surrounding next month’s British parliamentary elections.
Sterling dropped to 1.4587 in early New York action, as British industrial production and construction output in February were considerably slower than the forecasts and that sent the pound spiraling down in Europe which carried over into U.S. trading.
British industrial output rose 0.1 percent in the month, one-third of the estimate and construction output fell 0.9 percent, far weaker than the predicted 2.2 percent gain. Manufacturing production came in as predicted at 0.4 percent. The annual figures for each were worse than forecast: industrial production 0.1 percent vs. 0.3 percent; construction output -1.3 percent vs. 1.9 percent; manufacturing production 1.1 percent vs. 1.3 percent.
The GDP estimate from the National Institute of Economic and Social Research (NIESR), an independent research organization, predicted that growth would remain at 0.6 percent in February as in the prior four months.
The latest election polling showed that the Scottish National Party might win all of the parliamentary seats in Scotland in the May 7th election. That would give the party, whose program to establish an independent Scotland was defeated in a national Scottish referendum in September, a potential king maker role over the next British government.
In addition, other polls show the Labor party, led by Edward Miliband, gaining ground against the Conservatives headed by current Prime Minister, David Cameron.
Labor’s traditional social policy focus and the tightness of an election that might not produce a clear victor able to form a new government, have gvien the currency markts jittters even though each party is expected to continue the restrained fiscal policies of the current government.
The sterling has lost 15 percent of its value against the U.S. dollar since its July high at 1.7192 and is down 13 percent versus the euro.
British equities, however, have roared ahead, propelled, as on the continent, by the ECB's quantitative easing program. The FTSE 100 set a new record of 7095.36 in today’s trading.
Chief Market Strategist
WorldWideMarkets Online Trading