The pound has a steadier day

The pound enjoyed a steadier day against both the euro and the US dollar yesterday. The Office for National Statistics (ONS) reported that UK industrial production rose by 0.1% (month-on-month) or by 2.9% (year-on-year) during January in line with market expectations.

Meanwhile, a survey by recruitment group Manpower reported that for the first time since 2008, all nine industrial sectors in the UK expect to increase employee numbers after the winter storms delivered a boost to the construction industry which is now predicting a hiring spree as homeowners begin repair work on their flooded properties.

Mark Cahill, ManpowerGroup UK managing director commented that “The UK jobs market has reached a turning point. While the overall outlook has been consistently positive now for a number of quarters, it’s been six years since the employers have reported positive hiring plans in every single sector.”

The National Institute of Economic and Social research (NIESR) reported yesterday that UK gross domestic product (GDP) grew at 0.8% during the three months ending February 2014, up from a rate of 0.7% in the three months to January.

In contrast, the British Retail Consortium (BRC) reported that UK retail sales fell in February, casting fresh doubt over UK consumers' ability to keep driving the UK economic recovery.

The BRC reported that like-for-like sales in February fell by 1% from their level in February 2013.

BRC Director-General Helen Dickinson commented that the data showed the consumer-led recovery was still developing.

Bank of England (BoE) Governor Mark Carney told a parliamentary committee yesterday that the Monetary Policy Committee (MPC) are unlikely to begin to adjust UK interest rates until the second quarter of 2015. UK interest rates have now been stuck at their historic low level of 0.5% since March 2009. Carney did however warn that UK interest rates may rise six-fold to reach 3% by 2017 which implies mortgage rates of around 6%.

In the euro zone, European Central Bank (ECB) executive board member Sabine Lautenschläger commented that in her opinion, there was no need for the ECB to make a move just yet but that the ECB has plenty of options to act if necessary in response to the concern in some quarters that the ECB’s lack of action to curb the deflation risk in the euro zone could force the area to endure a Japanese style ‘lost decade’.

The International Monetary Fund (IMF) joined the argument on Monday after its Chief Economist Olivier Blanchard warned that there was “without a doubt, risks of deflation, especially in the euro zone”.

In Japan, the Bank of Japan (BOJ) maintained its monetary policy unchanged yesterday as was widely expected but did revise down its outlook on exports even while reiterating the view that economic growth and consumer price increases remain on track.

The BOJ will also continue to increase the money supply at an annual pace of 60 to 70 trillion yen for a monetary base target of 270 trillion yen.