The pair slipped sharply despite the release of better-than-estimated growth figures amid concerns the British economy may relapse into another recession.
Still, the outlook for the British economy is worrying; noting that the latest announcements by BoE policymakers revealed that the economy could witness another contraction or recession in the coming quarters and the BoE may add further to stimulus after the current round is completed.
The British economy expanded of 0.5% in the three months ended September, according to the GDP advanced reading, beating estimates of 0.3% and compared with the 0.1% expansion recorded in the second quarter.
However, the optimistic report’s effect was offset by the drop in U.K. PMI manufacturing to 47.4 in October from the prior expansion of 51.1 in September.
By the same token, China’s PMI manufacturing showed an ease in expansion to 50.4 in October from 51.2. U.S. manufacturing sector growth also slowed to 50.8 in October from 51.6.
Moreover, the pair was affected by the general sentiment which was fueled with tensions after the Greek Prime Minister called for a referendum on the euro area’s latest bailout package.
The announcement by Papandreou ignited fears after the debt relief accord announced last week by European leaders which included that private sector bondholders will bare 50% losses of Greek debt to cut it by 100 billion euros, while leveraging the firepower of the EFSF to 1 trillion euros from the current 440 billion euros.
In the case of the rejection of the bailout, the debt-laden country would be vulnerable to a default.
Concerns aggravated in markets this week amid worries regarding the implementation of the measures announced by European leaders last week.
On Wednesday, as of 09:30 GMT, the U.K. will release PMI construction for the month of October, where the U.S will release important data. As of 11:00 GMT, MBA mortgage approvals for Oct. 28 will be available. At 12:15 GMT, the U.S economy is to release ADP employment change where it is expected to show an increase to 101,000 in Oct. from the previous 91,000. Thereafter, specifically at 16:30 GMT, eyes will be on FOMC rate decision which is expected to show no change as the Fed will probably leave borrowing cost at its low level of 0.25%.
The U.S. data will be awaited, especially ADP employment as it will provide some indication about the status of the labor sector before the release of the non-farm payrolls on Friday. Also, data from the U.K. may have an impact on the pound after the drop in manufacturing, where services gauge will be released on Thursday.
See what are the upcoming financial event on the FX Empire Forex Economic Calendar now.
