Pound Sterling has already fallen 0.17 percent to 1.1412 after opening at 1.1426. The British currency has suffered similar deficit against the US dollar, falling 0.19 percent to 1.2920 after opening at 1.2946. It’s likely to be a vital day for the pound, with significant data being released this morning that will provide markets with a steer on the stability of the economy at the start of the new year.
The Office of National Statistics is releasing its first estimate of GDP, along with manufacturing and trade data at 9.30am.
UK economic growth is expected to have slowed at the end of last year, with markets expecting a monthly GDP figure of 0 percent for December – down on the 0.2 percent recorded in November.
GDP for the final three months of last year is expected to come in at 0.3 quarter on quarter while the annual GDP number is also forecast to be 0.3 percent.
Concerns over the pound have mounted further this morning after a new report revealed UK manufacturing output plummeted to a 150month low as the industry anticipates a cliff-edge Brexit.
The report states business confidence has sunk to its lowest level since December 2016, while output in the services sector remains below the long-term growth trend.
Business advisers BDO warned stockpiling by companies ahead of the UK’s departure from the European Union is likely to have masked an even greater decline.
A separate business survey also showed employment fell for the first time in four years amid Brexit concerns in Northern Ireland.
The Purchasing Managers Index (PMI) said conditions were “subdued” at the start of the year, with reduced staffing levels primarily due to job losses in the services sector.
The survey of firms revealed business activity rose at the weakest pace for more than two years, while new orders only increased marginally.
Arne Anders Lohmann Rasmussen, chief analyst at Danske Bank, warned sentiment in the pound could erode unless there is a reduction in the no deal Brexit risks.
He said in a recent currency strategy note to clients: “We maintain the view that it will require further reduction in the ‘no deal’ Brexit risk for EUR/GBP to test and eventually break below 0.86.
“Appetite for GBP is likely to deteriorate as 26 February approaches without any signs of an agreement between the EU and UK.”
But Morgan Stanley strategist Hans Redeker is more optimistic, and said: “We emphasise our bearish EUR/GBP call even though the BOE has lowered its GDP projection towards the lowest level since 2009.”
This morning’s bleak figures come after the Bank of England sensationally warned the UK economy is not prepared for a no-deal Brexit after growth was downgraded to its lowest level since the financial crash.
Bank of England Governor Mark Carney pointed towards uncertainties around Brexit causing “short-term volatility” and a “series of tensions” in the economy and businesses.
He said: “The fog of Brexit is causing short term volatility in the economic data, and more fundamentally, it is creating a series of tensions in the economy, tensions for business.
“Although many companies are stepping up their contingency planning, the economy as a whole is still not yet prepared for a no-deal, no transition exit.”
Mr Carney added: “Given the wide range of potential scenarios and the various paths to them, it would be remarkable if the current levels of sterling and other uk financial asset prices were consistent with the outcome that finally emerges.
“Uncertainty around negotiations has obviously intensified since November and is now weighing more heavily on activity, predominantly lower business investment and tighter financial conditions.”