Double Dose of Bad News Sends British Pound to a New Record Low

Double Dose of Bad News Sends British Pound to a New Record Low

Stronger producer prices drove the British pound higher yesterday, but the lack of meaningful follow through into consumer prices and continual drop in house prices drove the pound to a one month low against the US dollar and to a new record low against the Euro.

The CPI numbers today indicate that producers are finding it difficult to pass on higher costs to consumers which mean that they are taking a hit to profits. This trend cannot last forever before corporate profitability starts to seriously suffer or producers begin to raise prices. The UK economy is still in trouble, especially after house prices as measured by the Royal Institute of Chartered Surveyors (RICS) fell by the fastest pace in 30 years. At this rate, it is very likely that the UK could be following in the US’ footsteps. In the meantime, employment numbers could help the GBP tomorrow. The improvement in the employment components of the manufacturing and service sector PMI reports suggest that there may have actually been job growth last month.