UK Industrial Data To Influence Sterling Sentiment

As far as the UK economy is concerned, the high degree of attention has been focussed on the housing sector amid fears over a sharp slowdown and there will also be further unease over the financial sector. Both these fears certainly appear justified.

The industrial data has received less attention, but will still have an important role to play in the economy and Sterling's direction. If the industrial sector also comes under downward pressure, then wider fears over the UK economy will also increase as all major sectors will tend to weaken at the same time. Firm data would provide reassurance and also ease fears that Sterling is overvalued.

The latest UK industrial data will, therefore, be watched closely on Monday.

The PMI index for the manufacturing sector recorded a decline in September, but was still above the 55 level which suggests steady growth in the sector. The recent official data has tended to be weaker than the survey evidence over the past few months with a 0.1% production decline reported for July.

Any further monthly decline in output for August would be an important negative factor for Sterling and trigger significant immediate losses.

Although a small monthly increase looks to be the more likely outcome, a rise of at least 0.5% will be required to provide any significant boost to Sterling and rallies for the UK currency are still likely to be sold into given the persistent underlying doubts.

By: Investica

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