Home » Currency Note » Currency Note » Brexit woe continues with manufacturing slump

It wasn’t a great start to the week for UK economic data, with figures showing that manufacturing production slumped by 2.1% year-on-year in December 2018. The markets had been expecting a more modest fall of 1.1%, with yesterday’s reading confirming the third consecutive month of declines. If that wasn’t bad enough, we also saw the Brexit woe continue, with the Office for National Statistics reporting that UK GDP contracted by 0.4% in December.

In the fourth quarter of 2018, the UK economy expanded by 1.3% year-on-year, down from a revised 1.6% in the previous period and below market expectations of 1.4%. It is the weakest performance since the second quarter of 2012. If we look at the full year, UK GDP increased by 1.4% – the weakest since 2009. Tellingly, all three drivers of growth in the British economy – services, production and construction – shrank in December.

It is worth pointing out that the eurozone’s economy is faltering too at present, with Morgan Stanley the latest bank to slash its economic forecasts for the euro area. It has also pushed out the European Central Bank’s first rate hike to June 2020. It is clear that the global economy is struggling, which helps highlight how the uncertainty over Brexit could hardly be happening at a worst moment. It is possible a bad situation could be exacerbated. Speaking of Brexit, the European Union published a slideshow explaining the Withdrawal Agreement last week. At 59 pages long, it is evidently complex, but still interesting viewing.

The Defence Secretary, Gavin Williamson, was ridiculed for suggesting that Brexit could ‘enhance the UK’s lethality’, while Boris Johnson responded to suggestions that sterling could fall by 20% after Brexit by saying ‘The pound will go where it will’. Which neatly brings us onto idea that there is very little we can do to predict the pound’s movements over the next few months, so it makes sense to put strategies in place to protect your money now. A forward contract lets you lock in today’s rate for no further fees. Speak to your Personal Trader to find out more on 020 7898 0541.

The pound tumbled against the dollar once more yesterday and dipped below €1.14 at one point too. Sterling has weakened against the dollar in nine of the past ten days, with very little on the horizon to arrest the decline. Of course, there could well be a Brexit breakthrough at any moment, which would help boost sterling. However, it is very difficult to envisage a breakthrough at the moment, with the House still so deeply divided and the EU firm in its refusal to accept too many amendments to the proposals already agreed.

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