NEW YORK—The beleaguered U.K. pound slumped Wednesday after weak economic data again highlighted the tentative nature of the U.K.'s emergence from recession.
U.K. manufacturing output fell sharply in January, while industrial production unexpectedly slipped after economists had expected a slight gain. The pound dropped to its lowest level in a week in morning trading.
"The bottom line is the U.K. economy has started the year on a poor note," said Audrey Childe-Freeman, senior currency strategist at Brown Brothers Harriman in London. "We have said it all before: Whether it is uncertain politics, poor economics, an unsure monetary policy environment or a worrisome fiscal position, it is still all negative for the pound," she said.
Early Wednesday morning, the U.K. pound was at $1.4929 from $1.4995 late Tuesday. The euro was at $1.3602 from $1.3600. The dollar was at 90.43 yen from 89.98 yen, while the euro was at 123.01 yen from 122.36. The dollar was at 1.0751 Swiss francs from 1.0755 francs.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 80.661 from 80.580.
The pound had already been under fire on Tuesday, when Fitch Ratings said the deterioration in the U.K.'s credit profile during the global financial crisis has been within the "tolerances" of triple-A rated countries, but that the government's current plan to cut the deficit by half over four years was "too slow." Fitch also said the cloudy outlook for the U.K. economy was a concern.
An uncertain U.K. political situation adds to the pound's woes. A parlimentary election, which must be held by June, could end without one party having a clear majority, which could lead to political gridlock that could stymie efforts to deal with bloated budgets.
U.K. manufacturing output unexpectedly fell 0.9% in the first month of the year, it was reported Wednesday, following a 0.9% gain in December. Industrial production was far weaker than expected, slipping 0.4% on the month and 1.5% on the year; analysts had expected industrial output to rise 0.2% on the month and 0.7% on the year.
Meanwhile, the euro emerged little-changed against the dollar from day-earlier levels as investors await news on how the euro zone will continue to grapple with debt-strapped Greece.
The common currency is likely to remain under pressure, even if the Greece picture brightens, "with deflation pressures in the periphery likely to require loose monetary policy for an extended adjustment period," analysts at BNP Paribas said.
