The Eurozone posted an increase in Industrial Production for July, following a sharp drop off in production in June. This was in line with analysts’ expectations for the month, with output rising at 0.1%. Although this doesn’t seem like a huge jump, the signs are there that this figure is set to increase as business’ upbeat sentiment was confirmed by the amount of capital goods that were bought.
The yearly figure showed that industrial production had increased to 3.2%, however this was slightly below what was expected. In light of this data, the Euro made an additional gain on Sterling following this morning’s unemployment report released by the UK. Average earnings in the UK are not keeping up with current levels of inflation and will therefore put a squeeze on UK households.
Debt is currently a concern for the Bank of England as people borrow more to cover the costs of living. As inflation rises, the Bank’s concern is that people won’t be able to pay off these debts. This leaves the Bank of England in a very precarious position when it comes to raising UK interest rates.
This is the reason as to why the gains of yesterday’s inflation report for Sterling were wiped off earlier today. Hopes of an interest rate rise in the UK have somewhat lessened and as a result Sterling retreated against its counterparts. The hopes for an interest rate hike in the UK are still, at present, very thin in my opinion.