Pound surges to strongest level this year as industry surges

According to the Telegraph, the pound has posted its biggest jump against the dollar since 2009, as industry surprised economists in March, growing more swiftly than had been expected.[1]

Official figures showed industrial output beat forecasts with its fastest rate of growth in six months, and that sent sterling 1.5 cents higher against the dollar to $1.57- it’s highest since December.

This Is Money has reported that Britain’s industrial output rose 0.5 per cent in March, the strongest growth since September and by 0.1 per cent in the quarter, compared to the 0.1 per cent decline estimated last month by the Office for National Statistics (ONS).

It comes as the Bank of England held interest rates at 0.5 per cent at the end of the first meeting of the Monetary Policy Committee since the general election.

The central bank has published its latest economic forecasts for the UK in its quarterly inflation report. According to Governor Mark Carney, inflation may well fall below 0 per cent in the coming months, but it will pick up by the end of the year and go back to 2 per cent in a couple of years. Any suggestion that the rates could rise earlier than currently anticipated is likely to drive sterling higher still.

Meanwhile, manufacturing output rose faster than expected by 0.4 per cent in March, which comes after 12 months of weak growth for the sector, according to ONS, which eases fears of a slowdown in the first part of the year [2].

Chris Williamson, chief economist at Markit, said the data showed encouraging signs of growth in March which would be “widely seen as upping the odds of interest rates rising later this year”.

But he added: ‘The overall picture, in fact, remains one of a manufacturing economy that is struggling to expand in the face of the stronger pound and heightened business uncertainty.

“The near-stagnation of the sector over the first quarter is a reminder of how little progress the UK has made in terms of re-balancing towards manufacturing and will probably do little to persuade the Bank of England that the economy is ready for higher interest rates.”

[1] Peter Spence, Economics Correspondent, The Telegraph
[2] Camilla Canocchi, This Is Money