Pound Declines Amid Risk Aversion

05:37, 2nd October 2014

(RTTNews) - The pound fell against its major opponents in early European deals on Thursday, as European stocks fell ahead of the outcome of monetary policy meeting from the European Central Bank, due shortly.

Eurozone manufacturing sector activity hit a 14-month low in September, while inflation fell to a five year low for the same month, reports showed this week, raising speculation that the central bank may implement additional stimulus measures to shore up the bloc's shaky recovery.

The ECB is scheduled to announce much awaited details of its asset purchase programme at its meeting in Italy, after cutting rates unexpectedly last month.

U.K 's construction activity growth quickened unexpectedly in September, results of a survey by Markit Economics and the Chartered Institute of Purchasing & Supply showed.

The Markit/CIPS construction purchasing managers' index, or PMI, edged up to 64.2 in September from 64 in August. Economists had expected the index to decrease to 63.5.

This marked the fastest rate of increase since January and the second fastest rate in seven years.

The pound fell to a 2-day low of 0.7817 against the euro, compared to 0.7797 hit at Wednesday's close. On the downside, 0.79 is likely seen as the pound's support level.

Eurozone's producer prices declined at a faster than expected rate in August, a report from Eurostat showed.

Producer prices dropped 1.4 percent year-over-year in August, which was more than the 1.2 percent fall expected by economists.

Pulling away from an early high of 1.5499 against the Swiss franc, the pound fell to a 2-day low of 1.5444. If the pound continues its slide, it may eye support around the 1.53 region. At yesterday's close, the pair was worth 1.5470.

The pound declined to 175.28 against the yen, its weakest since September 17. This is down by 0.5 percent from Wednesday's closing value of 176.22. Next key support for the pound-yen pair is seen around the 174.00 mark.

Japanese companies maintained their inflation estimates for the next year and coming five years, a survey from the Bank of Japan showed.

Firms forecast inflation of 1.5 percent in the coming year, unchanged from the previous estimate published in April.

Having advanced to 1.6249 against the greenback in early deals, the pound reversed direction and dipped to a new 3-week low of 1.6155. The pair ended yesterday's trading at 1.6183. The next possible support for the pound lies around the 1.61 region.

Looking ahead, the European Central Bank is due to announce its rate decision at 7:45 am ET. The central bank is expected to maintain its refinancing rate and deposit rate at 0.05 percent and -0.2 percent, respectively.

The U.S. weekly jobless claims for the week ended September 27 and factory orders for August are to be released in the New York session.