European focus: The pound fell
The pound fell to a 15-month low against the euro as a report showed U.K. manufacturing growth unexpectedly slowed in June, adding to evidence that the economic recovery is faltering.
A gauge of factory output dropped to 51.3 in June from 52.1 in May, Markit Economics and the Chartered Institute of Purchasing and Supply said today. That’s the lowest level since September 2009.
“Sterling is being completely marginalized by the worsening economic growth outlook in the U.K.,” said Peter Rosenstreich, chief foreign-exchange analyst at Swissquote Bank SA in Geneva. “If we continue to see an erosion in growth prospects then the possibility of rate hikes is virtually out of the question.”
Britain’s currency slid against the euro yesterday on bets a faltering economy will limit policy makers’ ability to raise interest rates, at the same time that the European Central Bank lifts borrowing costs to curb inflation. A report yesterday showed U.K. consumer confidence fell more than economists forecast in June while the Bank of England’s Credit Conditions Survey said mortgage demand will drop in the third quarter.