THE TAKEAWAY: UK industrial production as expected M/M, weaker Y/Y -> markets await BOE rate, easing decision -> Sterling sold against Euro, US dollar ahead of BoE
UK industry expanded as per expectations in February but fell compared to this time last year, the UK stats bureau said today. Industrial production grew 0.4% on the month, but shrank 2.3% compared to February 2011. Economists had expected a smaller yearly drop of 2.1%.
The previous monthly and yearly numbers saw downward revisions, fueling speculation that the UK industrial sector’s situation is bleak enough to warrant another increase in quantitative easing from the Bank of England. The central bank is slated to release its monthly interest rate/easing decision today. The BoE has recently provided ultra-accommodative conditions in a bid to spur lagging economic growth, but is not expected to modify rates or increase easing in today’s decision.
However, minutes released from the last BoE meeting revealed that a minority of members supported increasing easing at the time.
Sterling dropped against the dollar and Euro following today’s weaker than expected data. Cable traded well within yesterday’s range ahead of the BoE’s upcoming decision.