Sterling logged a two-week low against the euro as the EUR/USD currency pair dropped below 1.13. The pound found a bid following an upside surprise in UK manufacturing output data, which came in at 2.4% year over year in January, up on the median for 2.1% and from an upwardly revised 3.0% in November.
After a solid run of UK data, highlighted by the January PMI surveys that showed all three sectors manufacturing, construction and services, beating expectations, sterling is likely to appreciate. Incoming data is expected to continue to paint a similar picture.
U.K. December production data are mixed, with industrial production falling short of expectations at 0.1% month over month and 0.5% year over year growth, and manufacturing output exceeding the median forecast at 0.1% month over month and 2.4% year over year. Back revisions were positive, with manufacturing production revised to 0.8% month over month from 0.7% and to 3.0% year over year from 2.8% year over year. This broader industrial production figure decelerated from the 1.1% year over year growth pace seen in November, but this shouldn’t perturb markets much as the January PMI manufacturing survey has portended a rebound in activity in January.
The EUR/GBP logged a fresh low for the current move keeping the down trend of the currency pair intact. Momentum is negative as the MACD is printing in the red with a downward sloping trajectory. The relative strength index is printing a reading of 35, which is on the lower end of the neutral range. The next level of target support for the currency pair is the weekly highs made in 2005 at 0.7150.