Pound on Worst Run Since August Versus Euro Amid Faltering DataBy
Shared currency is also climbing after ECB meeting this week
Sterling is set for a second weekly decline against the dollar
The pound headed for its longest losing streak against the euro since August amid evidence that the U.K.’s decision to leave the European Union is starting to hit economic data just as European policy makers strike a more positive note on the region’s own prospects.
Sterling depreciated for a sixth day versus the euro, and also headed for a second week of declines against the dollar. Reports on Friday showed manufacturing, industrial and construction output all shrank in January from the previous month, adding to evidence that the trend of robust data following the Brexit vote may be coming to an end. The euro is also strengthening after European Central Bank President Mario Draghi gave a more upbeat outlook for the region’s economy at a press conference yesterday.
The U.K.’s recent resilience was mainly due to the rise in consumer debt, “which is unsustainable,” said Erik Weisman, chief economist and fixed-income portfolio manager at MFS Investment Management.“I am bearish on the pound and I think it will be lower a year from now. Similarly, while the U.K. economy will not unravel due to Brexit, I would expect the process to take a toll on growth for many years to come.”
Friday’s reports come after housing data yesterday showed demand had dropped to a six-month low last month while data last week showed Britain’s key services sector expanded at the slowest pace in five months in February.
- EUR/GBP climbs 0.4% to 0.8727 and is set for a 1.1% appreciation this week. The pair is gearing for a test of 0.8748, the 76.4% Fibonacci retracement of Jan. 16-Feb. 22 fall
- GBP/USD is little changed at 1.2150, set for a 1.2% decline this the week
- “Cable remains offered pre-1.2200,” says Ipek Ozkardeskaya, senior market analyst at London Capital Group. “The negative trend is picking up momentum for a potential pullback toward the 1.20 level”
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