Pound gains on better UK data. ECB Decision today.

Good Morning. The pound had a great day yesterday, gaining comments from a Bank of England policymaker which were seen as very positive, and Sterling was also helped by better than expected UK economic data. Rates @ 08:30am are as follows:

  • GBP/EUR 1.1208
  • GBP/USD 1.6282
  • GBP/AUD 1.7477
  • GBP/NZD 2.1906
  • GBP/CAD 1.6784
  • GBP/CHF 1.6581
  • GBP/ZAR 12.006
  • GBP/DKK 8.3387
  • GBP/NOK 9.1566
  • GBP/JPY 149.51
  • EUR/USD 1.4522

Bank of England Comments
Andrew Sentance, a member of the BoE’s Monetary Policy Committee, was quoted in a newspaper as saying the central bank was close to holding back on injecting stimulus into the economy and would gauge the impact of its measures.The comments were seen as indicating the BoE may pause in its asset purchasing programme next month, particularly as he said inflation had not fallen as sharply as expected last year.

Industrial Output
An unexpected 0.4% gain in UK industrial output in November also helped sterling gain. The figures give weight to the view that the UK exited recession in the fourth quarter of 2009.
However, manufacturing output, a subset of industrial output, showed no growth, suggesting any recovery may be slow.

UK now out of recession?
The UK economy grew by 0.3% in the fourth quarter of 2009, a leading economic think tank has said.

The National Institute of Economic and Social Research (NIESR) predicts that the economy returned to growth, bringing an end to the recession. NIESR’s estimates come ahead of the official gross domestic product (GDP) figures for the fourth quarter, which will be released on 26 January.

The UK economy has contracted for six consecutive quarters. That means the current recession is the longest since records began in 1955. It’s worth noting however that these figures are an estimate. The real figures will come at the end of the month, and then we’ll know if we’re still in recession or not.

Today’s Data
The European Central bank will today announce if they will raise interest rates. It’s very unlikely, and we expect rates to be left on hold, however after the decision the speech given may give clues as to how the economy is faring. If they are very positive, then the Euro may strengthen, and wipe out the gains that the pound has made in the last few days. It is worth considering fixing a rate with a Forward contract in advance of this announcement to lock in the best rates for several weeks and protect yourself against rates dropping away.

  • Ger – Consumer Price Index
  • ECB – Interest Rate Decision
  • US – Jobless Claims
  • US – Retail Sales
  • US – Import Prices

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