"GBP bulls quietly positive after no statement from the BoE but trap of updated forward guidance looms next week. Risk/reward favours selling cable rallies"
- Societe Generale analysts advised
Another prove that British economy will post stable, but not rapid growth this year appeared on Friday, with a report from the ONS showing manufacturing output expanded in December, albeit slower than it was projected.
Manufacturing sector, which accounts for around 80% of the broader industrial production tends to dominate the market impact, as it is considered to be a leading indicator of economic health. Production expanded 0.3% from November, when it contracted 0.1%. Despite a significant pickup, the data fell short of analysts' expectations for a 0.6% jump. On a quarterly basis production posted a 0.5% increase, lower than the 0.7% projections contained in the preliminary estimate of GDP at the end of last month. Even though the data came as disappointment, the impact of this figure is less than 0.05% of the Q1 GDP, therefore, the revision may not impact the latest quarterly growth figure. Taking it into account, market's reaction can be easily explained, as the Pound was little changed against other major currencies following the release of the data.
This week's headline will be the inflation report on Wednesday that can shed some light on BoE's future moves. Carney is expected to amend his forward guidance policy in the light of strong economic data.
© Dukascopy Bank SA