Forex Flash: Is the UK in a triple-dip recession? – Deutsche Bank

One of the main talking points yesterday was a disappointing UK industrial production print. Industrial and Manufacturing Production in the UK fell -1.2% and -1.5%, respectively in January – this fell short of broadly flat expectation. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The initial reading is due on the 25th April) and is of the view that the output contraction in Q412 and a high margin of error around his Q113 forecast have raised the prospect of a triple-dip in the UK (i.e. 2008-09, 2011-12 and 2012-13).”

Indeed, the sterling reacted badly to the IP release and gapped from around 1.491 to a 33-month low of 1.483 against the Dollar before recovering most of this ground to finish the day unchanged at 1.490. Interestingly for the UK, the 10-year bond break evens also edged higher to 3.347%, a level not seen since September 2008. So there is some risk that inflation expectations are being un-anchored.