CURRENCIES

THE pound may rise this week on expectations that reports will show an improvement in the economic outlook. That, along with the Government's plans to cut taxes and spend more money to spur growth, could boost investor confidence in the economy and reduce the need for the Bank of England to lower interest rates.

"The pound will be able to keep its gains [and could rise further]," said Ryan Shea, an economist at First Chicago Bank. "The tone of economic growth over the last couple of weeks has been supportive of the view that the economy is not going into recession. Growth will continue to surprise more than it has in the past."

The pound rose 1.65 per cent against the dollar and 0.7 per cent against the euro in the past week. Recently it was at $1.6340 and at pounds 0.6698 per euro.

A report due on Wednesday is expected to show that the unemployment rate stood at 4.6 per cent in February, while the number of people out of work and claiming benefits rose by 1,000. A bigger-than-expected jobs gain could reinforce the bullish outlook for sterling, traders said.

Still, other reports are likely to indicate that inflation remains benign, suggesting that the central bank has some scope for reducing interest rates this year. "Reports this week will probably remind us that we're not at the trough in the interest rate cycle," said Kit Juckes, currency strategist at NatWest Global Financial Markets.

Figures due on Wednesday are expected to show that growth in wage costs slowed in the three months to the end of January while average earnings growth slowed in the three months ending December. Retail sales figures are expected on Thursday.

Some traders turned bullish on the pound last week after the Government released a Budget that includes extra spending and tax cuts. These could generate growth and reduce the need for further central bank rate reductions. "We're bullish on sterling," said David Bloom, an economist at HSBC Markets. "The economy is going to bounce back."

The outlook for the euro worsened on Friday after economic reports highlighted tame inflation and economic slowdown in Europe. These reinforced expectations for lower interest rates that could tarnish the its allure.

German and French consumer prices barely budged in February, while Italy's economy contracted in the fourth quarter. Those figures give the European Central Bank room to lower its benchmark rate from 3.0 per cent soon.

"We've only seen bad euro numbers," said Steven Post, a currency trader at Bank Artesia in Amsterdam. "I don't think this euro retreat [from low levels] will last."

June euro interest-rate futures contracts indicate that three-month yields will be 2.93 per cent by then, 12 basis points below their current level, suggesting that about a 50 per cent chance the ECB will lower the rate by 25 basis points by then.

Expectations for a euro-region rate cut deepened on Thursday with the sudden resignation of German finance minister Oskar Lafontaine, who repeatedly urged the central bank to lower rates.

Investors speculated that Mr Lafontaine's departure may give the ECB greater freedom to spur growth without jeopardising its independence or damaging its credibility.

News
people'It can last and it's terrifying'
Sport
Radamel Falcao
footballManchester United agree loan deal for Monaco striker Falcao
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
News
peopleA spokesperson said the support group was 'extremely disappointed'
Voices
A man shoots at targets depicting a portrait of Russian President Vladimir Putin, in a shooting range in the center of the western Ukrainian city of Lviv
voicesIt's cowardice to pretend this is anything other than an invasion
News
i100
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The eyes have it: Kate Bush
music
News
i100
Life and Style
tech

Apple agrees deal with Visa on contactless payments

Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

.NET Developer

£650 per day: Harrington Starr: .NET Developer C#, Win Forms, WPF, WCF, MVVM,...

Java/C++ Developer

£350 - £375 per day: Harrington Starr: Looking for a Java/C++ Developer to wor...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor