UK Lobby Group Says Strong GBP Could Stun Manufacturing Growth

Britain’s factories have their strongest order books in six months but a rising pound could start to weigh on exports, the CBI has warned.

The strength in orders was reflected across the manufacturing sector in June, but firms operating in the food and drink sector were in the best shape with the fullest books in almost four years, the business lobby group said.

Katja Hall, the CBI deputy director general, added: “Growth is broad-based, with the recovery spreading its roots, and firms have high hopes for the coming quarter. However, the recent rise in sterling could impact on the resilient export orders we’ve seen lately.”

A strong pound makes British goods more expensive abroad, but imports cheaper. The pound has strengthened in recent weeks amid rising speculation that the Bank of England could raise interest rates before the end of 2014. It would be the first increase since March 2009, when the Bank’s monetary policy committee cut rates to an all-time low of 0.5% in response to the financial crisis.

Sterling hit a new five-year high against the dollar on Thursday, breaching the $1.70 mark to $1.7028, partly as a result of the US currency’s weakness.

Of those firms taking part in the CBI’s June industrial trends survey, 34% said total order books were above normal levels, while 23% said they were below normal, giving a balance of +11% which was the strongest since December.

via The Guardian

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza