Forex - GBP/USD close to 2-1/2 year lows on U.K. outlook

The pound was hovering close to two-and-a-half year lows against the dollar on Tuesday after data showing that manufacturing output in the U.K. fell sharply in January reinforced concerns over the outlook for growth.

GBP/USD hit 1.4832 during European afternoon trade, the pair’s lowest since June 2010; the pair subsequently consolidated at 1.4891, down 0.16%.

Cable was likely to find support at 1.4832, the session low and resistance at 1.4942, Monday’s high.

The Office for National Statistics said that manufacturing production dropped 1.5% in January, missing expectations for a 0.1% increase.

The ONS said industrial output also missed forecasts for 0.1% increase, falling 1.2% in January.

The data came after a report earlier this month showed that the U.K. manufacturing sector contracted unexpectedly in February, fuelling concerns over prospects for a triple-dip recession and increasing the risk of more easing by the Bank of England.

Meanwhile, a separate report showed that the U.K. trade deficit narrowed to GBP8.19 billion in January, from GBP8.73 billion the previous month.

Economists had expected the deficit to widen to GBP9.0 billion.
Elsewhere, sterling was lower against the euro, with EUR/GBP rising 0.14% to 0.8757.

The dollar continued to be supported by optimism over the improving U.S. recovery after data on Friday showed that the economy added significantly more jobs than forecast in February, with the unemployment rate falling to a four-year low of 7.7%.

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