Pound Erases Losses After U.K. Govt. Raises Growth Forecast
March 08 2017 - 4:50AM
RTTF2
The pound trimmed its early losses against its key counterparts
in the European session on Wednesday, after the U.K. Chancellor of
Exchequer Philip Hammond lifted up U.K. growth forecasts for this
year and slashed public borrowing figures, reflecting optimism in
the U.K. economy ahead of the Brexit talks that begin this
month.
In its spring budget, the Office for Budget responsibility
upgraded its growth forecasts for this year to 2 percent from
earlier projection of 1.4 percent, reflecting the recent strength
in the economy.
The British economy "has continued to confound the commentators
with robust growth", Hammond said, adding that his country's growth
was only second to that of Germany's among major advanced economies
in 2016.
Borrowing forecasts for 2017-18 was lowered to GBP 58.3 billion
and to GBP 40.8 billion for 2018-19. The forecast for 2021-22 was
GBP 16.8 billion.
Overall public sector net borrowing as a percentage of GDP is
predicted to fall from 3.8 percent last year to 2.6 percent this
year, Hammond said. Borrowing is projected to be 0.7 percent in
2021-22, the lowest level in two decades.
The pound weakened on Tuesday following the release of
disappointing Halifax house prices for February, as well as on
worries over the May's ability to stick to the March-end deadline
to start the withdrawal process.
The House of Lords on Tuesday voted to give parliament a
meaningful vote on the final outcome of withdrawal from the
28-member EU, blocking attempts by May to trigger Article 50 by
this month.
The pound slid 0.3 percent against the greenback and 0.2 percent
each against the Swiss franc, the yen and the euro for the day.
The pound held steady against its major rivals in the Asian
session today, with the exception of the Japanese yen.
Following the budget announcement, the pound reversed from an
early near 2-month low of 0.8695 against the euro and bounced off
to 0.8660. The next possible resistance for the pound is seen
around the 0.84 area.
Figures from Destatis showed that Germany's industrial
production recovered at a faster than expected pace in January.
Industrial output grew 2.8 percent in January from prior month,
when it fell by revised 2.4 percent. Economists had forecast
production to grow 2.6 percent after easing by initially estimated
3 percent in December.
The pound, having fallen to near a 2-month low of 1.2298 against
the Swiss franc at 6:30 am ET, reversed direction with the pair
trading at 1.2346. If the pound rises further, it may find
resistance around the 1.25 region.
Data from the Federal Statistical Office showed that Swiss
inflation accelerated to the fastest level in more than five years
in February.
Consumer price inflation doubled to 0.6 percent in February from
0.3 percent in January. This was the second consecutive rise in
prices and a similar pace of growth was last seen in June 2011.
Following a new 4-week low of 138.44 hit against the yen at 6:30
am ET, the pound rose back to 139.57.On the upside, the pound may
locate resistance around the 141.00 zone.
Data from the Cabinet Office showed that Japan's gross domestic
product expanded 0.3 percent on quarter in the fourth quarter of
2016 in final revision.
That missed forecasts 0.4 percent and was up from last month's
preliminary reading of 0.2 percent. GDP gained 0.3 percent in
Q3.
The pound showed a tepid recovery against the greenback, trading
at 1.2174, after falling to nearly 2-month of 1.2139 before the
release of budget statement. The pair was valued at 1.2200 when it
ended Tuesday's trading.
Data from payroll processor ADP showed that private sector
employment in the U.S. increased by much more than expected in the
month of February.
ADP said private sector employment surged up by 298,000 jobs in
February after jumping by an upwardly revised 261,000 jobs in
January.
Looking ahead, U.S. wholesale inventories for January and crude
oil inventories data are set to be released shortly.
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