The pound fell to five-year lows against the dollar on Friday as disappointing data on U.K. industrial production and uncertainty ahead of next month’s general elections weighed on the single currency.
The drop in the pound came after official data showed that U.K. industrial output was weaker than expected in February. The Office of National Statistics said industrial production edged up 0.1%, undershooting forecasts of a 0.4% gain.
The ONS attributed the disappointing data to a 12% annual decline in oil and gas production in February, the largest drop since August 2013.
The soft data sparked concerns over the outlook for first quarter growth, sending sterling lower.
The pound has already come under pressure amid concerns that the 7 May election will result in a hung parliament.
Elsewhere, demand for the greenback continued to be underpinned by expectations for higher interest rates, as investors regained confidence that the U.S. economy would continue to recover after recent economic reports pointed to a slowdown at the start of the year.
The greenback received a boost earlier in the week after comments by the presidents of the New York and Richmond Federal Reserve banks made the case for the Fed to begin policy tightening as early as the summer.
Some investors had pushed back the timing of a rate hike until late 2015 after a surprisingly weak U.S. employment report for March.
The pair’s fall resumed last week and took out 1.4738 and 1.4634 support respectively. Weekly Initial bias remains on the downside this week and current fall should target 61.8% projection of 1.5551 to 1.4634 from 1.4971 at 1.4404 next. On the upside, break of 1.4971 is needed to indicate short term bottoming. Otherwise, outlook will stay bearish in case of recovery. Further indication for a sell signal in the pair is the fresh cross of 21 and 55 EMA on the 4 hours chart with SSRC oscillator supporting the bearish movement.
In the week ahead, U.S. data on retail sales, inflation and consumer sentiment will be closely watched for further indications on the strength of the recovery. Tuesday’s U.K. inflation report and Friday’s jobs report will also be in focus.