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The pound has extended its weekly gains against the dollar, rising 0.29% on the day by mid-afternoon in New York, after earlier hitting as high as $1.6135, its strongest level this month.
For the week, GBP/USD is up 0.6%, spurred by improvements in the UK economy, with Governor Mark Carney saying just a few days ago that the UK boasts ‘one of the strongest recoveries in the advanced world’ and the Bank of England’s latest forecasts calling for growth of 1.6% this year and 2.8% in 2014.
According to Martin Weale, a member of the MPC and director at the National Institute of Economic and Social Research (NIESR), those forecasts might prove to be a little conservative. He said today that ‘to the extent that there is a return to normality, it would not be surprising if the economy grew faster than we have forecast.’
Wednesday’s inflation report from the central bank brought the dates forward for many key projections: back in August, when the BoE introduced a pledge to maintain rates at their current record lows at least until unemployment dropped to 7%, the prediction was for such an improvement to occur in 2016. The latest forecast suggests there is a 50% chance of 7% unemployment by the end of 2014 and 67% by the middle of 2015. Put simply, UK rates could be going up much sooner than previously anticipated.
The minutes from the last Bank of England MPC meeting will be published next week, and could contain more detail on how encouraging the UK economic conditions have become, as well us insights into divergences of opinion between the various members of the committee.