Sterling has hit a two-week high against the euro this morning following news that the British economy is continuing to head out of recession.
GBP/EUR had already been boosted yesterday afternoon, following the European Central Bank (ECB) opting to keep interest rates on hold again. This was expected, as was the ECB president Christine Lagarde’s insistence that they would not be influenced by the USA’s rising inflation – announced on Wednesday – her mantra being that they would be “data driven” and make decisions on a month-to-month basis.
For the UK, on the other hand, analysts are anticipating that rising US inflation will mean the Bank of England making only two rate cuts this year instead of up to six that had been predicted not so long ago.
The UK’s Gross Domestic Product (GDP) result for February shows that the British economy grew by 0.1%, to a three-month average of –0.2%. While a deceleration from last month, this is slightly above expectations and takes annual GDP to negative growth of 0.2%.
Also released this morning, a final result for Germany’s inflation rate for March was confirmed at 0.4%, an annual rate of 2.2%, its lowest rate for two years.
Against the US dollar, sterling has yet to recover from its fall of roughly 1.5% following the latter’s rising inflation news and remains two-thirds of a cent down on the week.
Until today it has been a relatively quiet week for UK data, so you may have missed the RICS “House Price Balance” yesterday, which showed that the UK’s property surveyors are more optimistic about the housing market than any point for 18 months. The Royal Institution of Chartered Surveyors are seeing more buying enquiries than at any point in the past two years, with rising price expectations finally extending to London and the South East.
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