Bank of England keep interest rates unchanged in April
10/Apr/2015 • Currency Updates•
The Pound fell sharply against the Dollar by 1% on Thursday after poor trade data was released in the UK.
There were no surprises at the last monetary policy meeting before the General Election in May, with the Bank of England maintaining interest rates at 0.5% for yet another month. Britain will now go through an entire parliament with no change in the benchmark rate, the first time this has happened since the aftermath of the Second World War. With consumer price growth expected to fall into negative in the coming months, an interest rate hike in 2015 now looks increasingly unlikely. The level of quantitative easing, known as the Asset Purchase Facility, was also kept unchanged once again at £375 billion.
Earlier, it was announced Britain’s trade deficit with the rest of the world had widened sharply in February. The deficit for goods and services, driven higher by a strong Pound and weak Eurozone demand, shot up to £2.9 billion from £1.5 billion a month previous. Elsewhere, UK house prices rose by 0.4% in March compared to a month previous according to Halifax. Positive real earnings growth and low mortgage rates helped propel prices by 8.1% from a year previous.
Friday will be a busy day in the UK economy, with a number of significant data releases likely to cause volatility in Sterling. Industrial and manufacturing production at 9.30am will be followed by the NIESR GDP estimate for the three months to March at 3pm.
The Euro depreciated throughout yesterday against Greenback, finishing the London session 1.1% lower.
Only five working days now remain for Greece to come up with a revised list of reforms to secure a deal on its next bailout, according to the EU yesterday. This news came as the Greek government promised to meet a deadline to repay €460m to the IMF.
A sharper than expected increase in imports negated the effect of higher exports in Germany in February, causing the trade balance to fall below expectations to a €19.7 billion surplus. Imports increased by 1.8%, while exports climbed 1.5%, causing the surplus to remain mostly unchanged on a month previous. Elsewhere, German industrial production figures met expectations, climbing by 0.2% month on month after an increase in the production of energy and capital goods. However, according to Bundesbank data, production declined on an annualised basis, down by 0.3%.
A lack of any major announcements in Europe today means Euro volatility will mostly be driven by events elsewhere.
Weak data in the other major economies and impressive labour market performance caused the Dollar to soar by 0.9% against its major peers.
Some very encouraging labour data from the US yesterday. Initial claims for jobless benefits remained at historically low levels last week, with the number of American’s filing for unemployment benefits beating expectations at 281,000. Despite increasing by 14,000 on a week previous, the all-important four-week moving average for claims decreased by 3,000 to 282,250, its lowest level since as far back as June 2000. This comes less than a week after disappointing nonfarm payroll figures, which suggested that labour market growth was weakening. Continuing jobless claims for the week ending 27th March also impressed at just over 2.3 million. Elsewhere, wholesale inventories rose by 0.3% in February as sales remained weak, suggesting wholesalers could have little incentive to aggressively restock warehouses in the coming months.
Today will see the release of the import and export price index and a speech by Federal Reserve Member Jeffrey Lacker at 1.30pm London time.