Pound Stays Down After Interest Rate Decision

The pound has continued to stay low against the US dollar following last week’s decision by the Bank of England to cut interest rates by 25 basis points to 0.25%, today GMT sterling is trading at $1.3064.

As there was robust employment figures released by the United States last week, where there was 255,000 more positions on the payroll for July, the dollar has been fortified further.

The latest Lloyds Bank Regional Purchasing Manager’s Index (PMI) has revealed that the UK suffered a severe economic downturn in July, as businesses decreased in output for the first time since 2012.

Overall, England’s PMI dropped from 52.5 in June to 47.4, its lowest since April 2009, any PMI reading below the 50 mark, indicates that there has been a contraction in production.

Businesses in London have been hardest hit, following the UK’s decision to leave the European Union, the PMI in the capital registered 44.4 in July, which was down from the 48.4 recorded in June, it was the steepest drop in activity across all 12 UK regions.

The South East with a score of 45.5 on the index, and the North East on 46, are also suffering in the post ‘Brexit‘ climate, only the East of England on 51 and the East Midlands with 50.9, maintained positive output growth, though rates of expansion slowed.

The survey also found that the run on job growth, which stretched back to the beginning of 2013 had ended last month, but it has only thought to have minimal impact on the labour market.

As the pound has plummeted after ‘Brexit’, companies have also been feeling the burden as cost pressures have increased the PMI discovered.

German Industrial Production Increase

There was positive news for the German economy, as official figures revealed that industrial production increased by 0.8% in June compared to the previous month, in May industrial activity fell by 0.9% in contrast to April, highlighting the turn around in the latest figures.

Production in industry excluding energy and construction was up by 1.5%, and within industry, capital goods increased by 3.5% and the production of consumer goods by 1.2%, whereas intermediate goods decreased by 0.7%, energy supply was also down by 2.7% in June 2016, and there was unfavourable data for the construction industry which decreased by 0.5%.

Sentix in their latest business sentiment index in the euro area found that ‘Brexit’ has had no effect on economic expectations, as the headline index score jumped up by 4.2 points in July, a leap from the 1.7 points that was recorded in June.

The survey also concluded that positive growth impulses of the Chinese economy are a major reason for the upswing in confidence.

The EUR/USD rate has fallen more in favour of the greenback, this morning CET the euro is buying $1.1085, down from $1.16 at the end of last week, the euro has continued to fall against the dollar since the last week in July when it reached buying over $1.12.