Economics news – who speaks for sterling?
If sterling was a child, the Bank of England should be cited by the NSPCC. Sterling closed below 1.50 against the dollar and below 1.15 against the euro. Will no one speak for the currency? Traders are ready to make the call on Carney to change the central bank stance of benign indifference and neglect. Further weakness was no surprise, neither was the decision by the MPC this week, to keep rates on hold and suspend further QE action for the moment.
Some surprise as Robert Chote decided to pick up the Prime Minister on his lax economics analysis. Austerity has slowed the rate of recovery, the message, don’t blame it all on Johnny foreigner, the headline. Not really sure why the OBR have held fire for so long, specifics in the realms of economics, have long since ceased to feature in Downing Street.
Service Sector – CIPS Markit UK Services PMI
Good news from the service sector, as the latest survey data recorded a rise in activity for the second month in succession. The Activity Index was 51.8 in February, slightly above January’s 51.5. The service sector will continue to lead the recovery in 2013. We still expect growth around 1.5% in the sector.
Just as well because the latest ONS release for January suggested construction output was 8% lower in the month compared to January last year. New work was down 10%. January was not a great month last year which has ominous implications for the year ahead. Our forecast of zero growth in the sector may be too optimistic.
End of Empire at the Bank
The governor has four months to go before completing his ten year stint. Not soon enough for the banking sector as Mervyn King challenges convention, yet again, in calling for a restructure of RBS. Describing the government’s ownership of RBS as nonsense, the boss of the black cloud gang, calls for the lender to be split into good bank, bad bank. Totally unhelpful to the teams within RBS preparing the Rainbow Bank for sale and the return of the main bank to the private sector. The end of empire is upon us. The Canadian cannot arrive soon enough.
What’s happened to Sterling
By the end of the week Sterling closed down 1.1474 from 1.1543 against the Euro. The Sterling Dollar rate closed at 1.4917 from 1.5035 and the Dollar closed down against the Euro at 1.295 from 1.3025 from 1.32. Why does everyone love the euro? It is chart traders, not fundamentals making the move.
Oil Price Brent Crude closed unchanged at $110.85. No threat to inflation, but check out the OECD paper suggesting $190 dollars per barrel possible by 2020, Ouch!
Markets, were up again this week. The Dow closed at 14,397 from 14,089 and the FTSE closed at 6,483 from 6,379. The FTSE will clear the 6500 marker before Easter, then may take a May break perhaps.
UK Ten year gilt yields rose to 2.06 from 1.89 and US gilts closed at 2.05 from 1.89. That’s a big move in the week, still a long way to go in search of the 4.50 par value.
The “Budget for Greater Manchester” statement on the 14th March looms. Just drafted the Manchester perspective this morning. We go to press on Monday.
That’s all for this week, don’t miss The Sunday Times and Croissants out tomorrow.
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