Pound holds on to recent gains

Ahead of the release of a raft of UK economic data, the pound kept hold of recent gains to continue to trade close to multi month highs against the euro and US dollar and multi-year highs against the Australian, New Zealand and Canadian dollars and South African Rand.

Analysts expect the Office for National Statistics (ONS) to report later on this morning that the UK jobless rate has fallen to 7.3% in the three months to November from a rate of 7.4% in the three months to September 2013, edging ever closer to the 7% threshold set by the Bank of England (BoE) at which it will consider starting to raise interest rates.

This morning also sees the release of the minutes of the last BoE Monetary Policy Committee (MPC) meeting from the beginning of the month where the nine members of the MPC decided to keep policy unchanged with UK interest rates at 0.5% and its quantitative easing programme at £375 billion.

Data from China showed that the world’s second largest economy continues to slow down with economic growth falling to 7.7% in the fourth quarter of 2013, down from the 7.8% registered in the third quarter.

In the euro zone, the ZEW survey on economic sentiment for January unexpectedly fell in Germany from a reading of 62 to 61.7 but picked up from 68.3 to 73.3 for the whole region.

This economic sentiment gauge is considered the more forward-looking indicator so the slight dip for the euro zone’s biggest economy, Germany suggests that the euro zone sovereign debt crisis is far from over.

ZEW President Prof. Dr. Clemens Fuest commented that "For months, the surveyed financial market experts have expected an economic upswing. In this month’s survey the clearly improved assessment of the current economic situation seems to confirm these expectations".