Sterling falls against euro on manufacturing data

01 Jul 2011 | 14:37
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Sterling has dropped sharply against the euro after data showed manufacturing growth fell to the lowest level in almost two years.

The UK's PMI manufacturing index fell to 51.3% from 52.1% last month as economic growth continued to struggle. The fall dragged the pound to €1.10390 initially.

It was also trading lower against the dollar, down 0.0032 cents at $1.6013.

"Sterling is being completely marginalised by the worsening economic growth outlook in the UK," said Peter Rosenstreich, chief foreign-exchange analyst at Swissquote Bank.

"If we continue to see an erosion in growth prospects then the possibility of rate hikes is virtually out of the question," he said in an interview with Bloomberg.

Analysts said the 21-month low posted today from the manufacturing sector, which accounts for 14% of the country's economy, supported the Bank of England's dovish stance.

The UK government has been relying on exports to offset weakening domestic demand and help pull the country's economy out of the downturn.

Earlier this month, BoE governor Mervyn King said risks to the UK's recovery justified the decision to keep the interest rates at a record low of 0.5%.

 

Categories: UK

Topics: Currency

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