In the UK yesterday data released showed manufacturing output unexpectedly fell in January. This was attributed to a sharp reduction in computers and electronics. Output declined 0.5 percent after a 0.1 percent increase in December. Total industrial production, which accounts for about 15 percent of gross domestic product, fell 0.1 percent in January, against an estimate for a 0.2 percent gain. The computer and electronics sector knocked 0.5 percentage points from output. From a year earlier, production rose 1.3 percent. The reason why industrial production didn’t fall further was a 2% rise in mining and quarrying over the month of January. It followed a 1.4% fall in December.
Economists said the manufacturing index rose to a seven-month high in February, and the British Chambers of Commerce raised its U.K. projections on Wednesday, though it said the recovery remains uneven.
The pound climbed for a seventh day against the euro, reaching its strongest level in more than seven years. Bank of England member Martin Weale also spoke yesterday, stating he sees a risk of a sharp fall in sterling because of the country’s large balance of payments deficit. Britain’s current account deficit was equivalent to 6% of GDP in the third quarter of last year, matching the biggest deficit on record.
Tensions between Greece and Germany increased yesterday, with reports from Athens that justice minister Nikos Paraskevopoulos is threatening to seize German assets to compensate Greek victims of Nazi war crimes. The German government responded by saying it has no plans to talk to Greece about war reparations. A spokesman for Angela Merkel said that questions of reparations and compensation have been legally and politically resolved.
Greece yesterday successfully sold €1.3bn of Treasury bills, covering the amount it needed to refinance a maturing issue. The issue was more costly for the government however, with the paper sold at a yield of 2.7%, up from the 2.5% yield at a previous sale in February.
The pound hit its lowest level against the dollar in 20 months, amid growing expectations that US interest rates will rise in coming months. The dollar has gained more than 10% against a basket of six major currencies so far this year, led by its rise against the euro. This puts it on track for its best quarterly performance since 1992.
GBP – 9:30: UK Goods trade balance (Jan) expected to fall from -£10.154B to -£9.7B
USD – 12:30:US Retail Sales MoM (Feb) expected to rise from -0.8% to 0.3%
GBP – 12:45: Bank of England Governor Carney makes a speech
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