Forex - GBP/USD pares gains after weak manufacturing data

Forexpros – The pound pared gains against the U.S. dollar on Tuesday, after official data showed that manufacturing production declined unexpectedly in June, adding to fears over the pace of the U.K. economic recovery.

GBP/USD pulled back from 1.6409, the daily high, to hit 1.6331 during European afternoon trade, still up 0.08% on the day.

Cable was likely to find support at 1.6227, the low of August 5 and short-term resistance at 1.6475, Monday’s high.

The U.K. Office for National Statistics said earlier that manufacturing production fell by 0.4% in June, confounding expectations for a 0.2% gain. Manufacturing production rose by 1.8% in May.  

Year-on-year, manufacturing production rose at an annualized rate of 2.1%, below expectations for a 2.8% gain.

Industrial production was flat in June, below expectations for a 0.4% increase. The previous month’s figure was revised down to 0.8% from 0.9%.

A separate report showed that the U.K.’s goods trade deficit widened unexpectedly to GBP8.9 billion in June, compared to a deficit of GBP8.5 billion in May.

Economists had expected the goods trade deficit to narrow to GBP8.2 billion in June.

Meanwhile, investors awaited a Federal Reserve statement on monetary policy due later in the day, which could provide hints regarding further easing.

 

With financial markets in turmoil, expectations grew that the central bank would introduce further easing to calm investors and stimulate growth in the world’s largest economy after it completed a USD600 billion Treasury bond-buying program known as Quantitative Easing 2 on June 30.

Elsewhere, the pound was lower against the euro, with EUR/GBP gaining 0.44% to hit 0.8726.

Later in the day, the U.S. was to publish preliminary data on nonfarm productivity and labor costs.

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