In September, the United Kingdom’s manufacturing production dropped by 1.7% compared to August. This was a larger decline than the expected 0.3%, indicating tougher times ahead. This decline in manufacturing output highlights ongoing economic issues. Recent data shows that the economy is performing worse than expected, which is affecting related sectors and financial markets.

Currency Pairs Affected

Several currency pairs have reacted to these developments. The GBP/USD currency pair fell to around 1.3100 due to the disappointing UK data during this time. Market analysts are examining how these changes will impact the industrial sector. It’s important for participants to keep an eye on upcoming economic reports to understand future trends in manufacturing. The UK manufacturing data for September was surprisingly low at -1.7%, far worse than the anticipated -0.3%. This drop is the largest we’ve seen since early 2024 when supply chain issues were prominent, indicating a significant slowdown in the UK economy. This downturn suggests we should brace for ongoing volatility and downward pressure on UK assets. As a result, the British Pound faces continued pressure, struggling to stay around the 1.3100 mark against the US dollar. We suggest using strategies that benefit from a weaker pound. Traders might consider buying put options on GBP/USD, aiming for a drop toward the 1.3000 support level by the end of the year.

Effects on the Bank of England

This disappointing economic news makes it harder for the Bank of England to decide on future actions, especially as the recent inflation report for October 2025 shows the Consumer Price Index (CPI) at 3.1%, significantly above the 2% target. The interest rate futures market reacted swiftly, with the chances of a rate hike in the first quarter of 2026 falling from over 50% last month to below 15% now. This expectation for lower interest rates is a clear obstacle for the pound. For traders in UK equities, the situation is more complex. While a slowing economy is worrisome, a weaker pound can actually help large multinational companies in the FTSE 100, as they earn most of their revenue in foreign currency. Therefore, it may be wise to avoid taking outright short positions on the index and instead focus on strategies that target the weak currency. Create your live VT Markets account and start trading now.

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