Pound may be Oversold, but Data Continues to Deteriorate

The British pound was no doubt caught up in risk appetite this morning as it sold off against most of its major counterparts. However, we shouldn’t simply attribute this plunge to a bigger market theme and move on. The data that crossed the wires today says a great deal about the country’s pace of recovery.

The August manufacturing PMI report unexpectedly tipped back into negative territory and mortgage approvals rose to a 15-month high; but the real stand out was the credit figures. According to the BoE’s statistics, consumers made a net 217 billion pound repayment on credit – the biggest on records going back to 1993. From a long-term economic perspective, this is a balance sheet improvement; but through the short-term, reviving growth will likely fall on the shoulders of consumers who have fewer jobs and smaller incomes.