Pound steady after inflation data

The pound initially fell but regained its morning losses in the afternoon after the Office for National Statistics (ONS) reported that UK consumer prices gained just 0.4% in December to reach a level of 2% year-on-year, shy of the 2.1% annual rate envisaged by analysts.

Meanwhile, the euro received some support yesterday after a surge in euro zone industrial production to its fastest pace in three-and-half years, raising confidence that the euro zone economy is likely to have expanded for a third straight quarter in 2013.

The data from Eurostat showed that euro zone industrial output rose by 1.8% in November and a full 3% on the year. This was the biggest recorded rise since August 2011.

Meanwhile, the Washington based World Bank has revised upwards its forecasts for global growth this year although it was quick to point out that any rise in interest rates and/or withdrawal of the stimulus measures long in place by the US Federal Reserve could derail the pickup in global economic activity.

The World Bank is now forecasting global growth in gross domestic product (GDP) to rise from 2.4% in 2013 to 3.2% this year, up from its last forecast in June for 2014 of just 3%.

The World Bank report focuses attention on the more advanced economies where growth is expected to register at 3.4% in 2015 and 3.5% in 2016.

World Bank President Jim Yong Kim Even commented that “Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery. Growth prospects remain vulnerable to headwinds from rising global interest rates and potential volatility in capital flows, as the US Federal Reserve Bank begins withdrawing its massive monetary stimulus”.

The World Bank report also forecasts developing country growth to rise above 5% in 2014 with some countries “doing considerably better” with Angola (8%); China (7.7%) and India (6.2%).