British Pound Presses Higher

The British pound and the New Zealand dollar were the only currencies that managed to strengthen against the US dollar today.

Better than expected economic data validated the market’s belief that the central bank will remain on hold for the foreseeable future. Although consumer spending declined for the second month in a row, the drop was not nearly as bad as the market had forecasted. The CBI industrial trends survey also rebounded from -13 to -10, reflecting an improvement in manufacturer sentiment. Adding to the inflationary pressures that the UK already faces, according to the CBI survey, manufacturers are expected to raise prices over the next three months. The likelihood of higher consumer prices is yet another reason why UK rates will remain unchanged. The preliminary report for first quarter GDP is due for release tomorrow. No revisions are expected to the prior estimate for 0.4 percent quarterly growth and 2.5 annualized growth.