After putting in a patchy performance for much of the European session, the Pound was able to advance on its peers following the release of the NIESR GDP estimate for January.
Separate figures showed that the pace of industrial/manufacturing output in the UK slowed in December, while the UK’s trade deficit shrank to its narrowest level since mid-2012.
The Pound fluctuated against its peers after the reports were released, but before the growth prediction for January was published Sterling enjoyed some underlying support from yesterday’s National Institute of Economic and Social Research comments.
NIESR forecast that the UK will post economic growth of 2.5 per cent in 2014 and 2.1 per cent in 2015.
The think-tank stated; ‘The UK’s economic recovery has become entrenched. Above trend growth returned in 2013, while the remarkable performance of the labour market persists. Consumer price inflation returned to the Bank of England’s target rate in December, raising the prospect of a resumption of real consumer wage growth.’
However, NIESR did add; ‘Our forecast remains one of gradual improvement in productivity, but continued stagnation poses a downside risk to the UK’s medium-term prospects.’
Today’s report showed that the British economy expanded by 0.8 per cent in January, up from growth of 0.7 per cent in December.
As recent UK reports have had a tendency to come in below forecast levels some economists had been expecting the report to show that growth slowed in the first month of the year.
The Pound’s gains on the US Dollar were aided by the news that the US economy added less jobs than expected in January, potentially putting pressure on the Federal Reserve to revise its current stance on tapering easing.
Meanwhile, Sterling enjoyed its most significant advance on the Euro for two weeks as lacklustre German industrial production data piled pressure on the common currency. The Euro also declined as the German high court pressed for EU authorities to question the constitutionality of the Overnight Monetary Transactions scheme proposed by the ECB at the height of its ‘whatever it takes’ stance.
Next week the Bank of England’s inflation report is likely to be the main cause of Pound movement.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6394 ,
Pound Sterling,,Euro,1.2044,
Pound Sterling,,Australian Dollar,1.8293,
Pound Sterling,,New Zealand Dollar,1.9797 ,
US Dollar,,Pound Sterling,0.6101,
Euro,,Pound Sterling,0.8305,
Australian Dollar,,Pound Sterling,0.5467,
New Zealand Dollar,,Pound Sterling,0.5049,
[/table]
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