Industrial Production data poses further threat to pound

12th January 2016 By: Ranko Berich

Industrial production figures – 12/1/16

Today’s disappointing Industrial Production numbers may relate to only a small part of the economy, but they have sent sterling into a tailspin. Combined with increasing political risk due to Brexit, and a dovish Bank of England, the pound’s immediate future looks grim.

November’s figures are part of a wider downwards trend that indicates the UK economy may see a challenging start to 2016. The labour market is still adding jobs, but any stall in the services or construction industries at this point would be very concerning.

Sterling’s performance will depend on whether the services sector can keep the labour market tightening, and if commodity prices recover to the point where the Bank of England believes rate hikes are justified towards the end of this year. Given all the poor or lukewarm economic data and mounting Brexit risk, a substantial recovery in sterling would require a long list of favourable developments.