Sterling falls again versus euro amid Brexit jitters
The pound was up just 0.1% at $1.4550, having reached as high as $1.4580 after UK data released in the morning showed output grew at its fastest pace in nearly four years in April.
Against a resurgent euro, it lost around a third of a percent, handing back some of a 1% gain on Tuesday due chiefly to a pair of polls which showed the Remain camp just ahead in the run-in to the UK’s June 23 vote on EU membership.
While sterling has recovered from lows hit in February, it continues to be buffetted by concerns that a vote to leave the 28-country bloc would leave Britain short of the investment it needs to fund a huge trade and current account gap.
“The (output) data was evidence again that such strong data is unable to leave its mark on sterling,” said Richard de Meo, director at Foenix Partners, a firm that offers currency hedging solutions to mid- and small-cap UK companies.
“The debate around the health of the economy has been sidelined and economic indicators have typically been represented by tiny blips in movements of a currency that is otherwise occupied with daily fluctuations in referendum polls,” he said.
Industrial output rose 2% in April after a 0.3% rise in March, the biggest month-on-month increase since July 2012, the UK Office for National Statistics said.
Economists polled by Reuters had expected it to stagnate on the month.
Even if the Brexit vote passes without delivering a major shock to the economy, most banks have doubts that the Bank of England will be able to start raising interest rates this year.
“Overall, we remain of the view that UK industrial production and manufacturing remains a cause for concern,” Barclays analysts said in a note.
“We believe this is driven by a structural lack of competitiveness, itself magnified by a strong currency, which although it has depreciated since mid-November 2015, is still historically strong.”
