The US dollar is little changed against most of the major currencies. Sterling is the notable exception, losing about 0.75% to trade at three-day lows. It was on the defensive in early European turnover but got the run pulled from beneath by the unexpectedly poor data.  

UK industrial output fell by 1.3% in October. The median forecast was for a small increase. While oil and gas took a toll, as one of the large North Sea fields was closed for maintenance, manufacturing output slumped by 0.9%. A small gain was expected.The decline was sufficient to push the year-over-year rate into contraction (-0.4%) for the first time since March. Last week’s PMI warned of further slowing in manufacturing in November.  

Sterling was near two-months highs yesterday, reaching $1.2775. It was sold off to almost $1.2580 today. It appears to found a bid, but it may be difficult to resurface above $1.2650. The euro had begun the week at nearly four-month lows against sterling just ahead of GBP0.8300. It traded a little above GBP0.8520 today but is running into offers as the 20-day moving average is approached (~GBP0.8530). The euro has not traded above this moving average since the US election. 

German industrial output also disappointed today. The 0.3% increase in October was a little more than a third of what was expected. The September series was revised to show a 1.6% decline rather than a 1.8% fall.The Bundesbank expects growth to accelerate here in Q4, and the PMI supports the optimistic assessment.

The euro has been trapped in about a quarter of a cent range through most of the European morning. Since stalling near $1.08 at the start of the week, the euro approached $1.07 yesterday. The ECB meets tomorrow and is expected to extend its asset purchase program, adjust some self-imposed rules to minimize the scarcity challenge, and ease the securities lending facility to alleviate some pressure in the repo market.