GBP/USD tumbled on disappointing manufacturing data

British pound lost positions sharply against the US dollar on Tuesday, following the official report, regarding manufacturing production, which stated the largest drop in four months in May.

GBP/USD tumbled to a session low at 1.4831 at 10:39 GMT, after which consolidation followed at 1.4860. Support was expected at July 8th low and a four-month low, 1.4856, while resistance was to be met at July 8th high, 1.4965.

Earlier on Tuesday the Office for National Statistics reported that UK manufacturing production decreased by 0.8% for the second consecutive month in May, raising concerns over economic growth outlook. The drop was 0.2% during April, while initial estimates pointed a 0.4% increase. On annual basis, manufacturing output declined by 2.9% in May, far exceeding forecasts of a smaller decrease, by 1.5%, while in April the indicator slid by 0.9%, a revision down from 0.5% previously. This registered stagnation in manufacturing sector during May, despite the sharp increase in oil and gas production, and the insignificant change in UK trade deficit outlined the slow rate of economic recovery. British industrial activity considerably decelerated in 2012, while in 2013 up till now the process of revitalization was going at incredibly slow pace. Industrial production in the United Kingdom declined by 2.3% in May on annual basis, far above the projected 1.5% drop, while in April this indicator recorded a 1.4% decrease. In monthly terms, industrial activity remained without any development in May, confounding projections that it will improve by 0.2%.

In addition, UK trade deficit registered a slight increase to 8.491 billion GBP in May from 8.430 billion GBP a month ago. Experts had expected a deficit of 8.485 billion GBP. Despite these figures, oil export showed good results. It climbed by 27.2% in May, compared to April, which was the most significant increase since September 2002 and a result of larger oil production in the country during May. Recent data showed less optimistic results, regarding UK import during the same month.

Meanwhile, greenbacks trend upwards was likely to continue, following the strong employment data from the United States on July 5th, which showed that economy added 195 000 job positions in June, surpassing the initially estimated 165 000. In June FED Chairman Ben Bernanke said that the central bank intended to scale back its easing program by the end of 2013, if US economic conditions were to meet FED’s objectives.

Pound slid to four-month lows against the euro as well, with EUR/GBP cross rising by 0.45% to 0.8644.