Sterling was unable to capitalize on an early rally against the dollar as weak economic data reaffirmed fears over the fragility of the UK recovery.
- Sterling initially advanced over a cent yesterday morning as selling pressure on the US currency mounted following an article stating that the dollar could cease to be used in oil trades in the Gulf States.
- However the pound relinquished its gains after weak manufacturing production data sapped investor demand for the UK currency.
- The manufacturing sector revealed a 1.9% decrease in production in August, reversing a three month increase in output, and falling well below expectations of a 0.4% rise.
- Economists, who had been hoping for a resumption of growth in the third quarter, warned that the figures could damage Britain’s recovery prospects.
- Although sterling completed its fourth straight day of declines, it has only slipped 0.4% in that time, with investors increasingly selling the dollar to buy higher-yielding currencies.
- The pound has continued to edge steadily downward in trading this morning, as risk appetite in the market continues to bypass the burdened UK currency.