Pound loses further ground to the US dollar

The pound lost further ground to the US dollar yesterday, falling by 0.91% to close the day at 1.6137.

• Concerns over the health of the British economy were fanned yesterday after the announcement of worse than expected industrial production data saw risk aversion spread and the pound heavily sold. Manufacturing output fell by 0.5% in May and the wider measure of Industrial Production contracted 0.6%, which surprised investors who were expecting both measures to grow by 0.2%.
  
• This news damaged hopes that the UK economy would bounce back in the second quarter after contracting at the fastest rate for 50 years in the first 3 months of this year. Indeed, the National Institute of Economic and Social Research announced that the UK economy shrank by 0.4% in the second quarter and admitted that they no longer believe that the recession reached bottom in March.
  
• The pound has continued to slide in this morning’s trading ahead of tomorrow’s Bank of England interest rate policy meeting, where many investors now believe that the BoE will expand their quantitative easing programme in a bid to encourage economic growth.
  
• In today’s trading Halifax House Price data is announced in the UK this morning, whilst in the US MBA mortgage applications, EIA crude oil stocks change and consumer credit figures are announced.