Pound euro exchange rate (GBP/EUR) crushed as manufacturing sector delivers "the worst readings in more than a year"

A look at the markets at mid-morning on Wednesday shows the pound to euro exchange rate is 0.3 pct down on last night's closing level at 1.1815. The euro to pound exchange rate is thus quoted at 0.8463.

The below graph tells the story in succinct fashion:

The British pound sterling is struggling right across the currency markets today.

Both Trade Balance data and Production numbers missed their mark signalling that UK Manufacturing sector may be starting to slow and sending sterling below the key 1.6000 support level against the US dollar.

Data points miss target, tomorrow's MPC event will be keenly watched 

Both UK Manufacturing production and Industrial production missed consensus estimates badly with the former printing at -1.2% versus 0.3% eyed and the latter at -1.1% versus 0.2% forecast.

"These were the worst readings in more than a year suggesting that Q3 GDP growth may be hampered by the manufacturing sector. Declines were led by pharmaceuticals, computer electronics and food and beverage output," says Boris Schlossberg at BK Asset Management.

Schlossberg points out that the UK economy has been a shining star in the G7 universe this quarter as it produced upside surprises in almost every economic report suggesting that growth was likely to rebound strongly in the second half of this year.

Indeed just yesterday the IMF raised its forecasts for UK by more than any other G7 nation.

"However, today news shows that the rebound in manufacturing sector may have hit a brick wall. That along with the recent slowdown in PMI indices signals that UK recovery may have peaked in the summer," says Schlossberg.

BK Asset Management have advised clients that tomorrow's monthly MPC meeting may prove to be especially important to the currency market.

UK monetary policymakers have been decidedly dovish even in the face of improving economic data and have come under criticism for being too accommodative.

"However, today's data shows that their caution may have been warranted and if they continue to assume a dovish posture cable could weaken further and slip below the 1.5900 level as the week proceeds," says Schlossberg.