The British pound is back above 2.000 after weak US data brings the divergence between US and UK monetary policies back to the forefront. Comments from Bank of England monetary policy officials confirm the central banks need to raise interest rates as early as May. In a testimony to the House of Commons Treasury Committee, MPC member Barker noted that demand growth was stronger than expected while Blanchflower and Besley warned that both money supply and consumer prices pose upside risk to inflation.
UK data was mixed with the stronger public finances and net borrowing figures offset by the weaker CBI manufacturing orders survey. Looking ahead, first quarter GDP is due for release tomorrow. Retail sales in the first quarter was soft with sales falling 1.5 percent in January, rising 1.6 percent in February and falling 0.3 percent again in March. Industrial production was also modest while the trade balance deteriorated. This suggests that even though the economy is still expected to grow, the risk of an upside surprise remains limited.