CURRENCIES

THE POUND changed little this week as investors weighed the chances of an interest rate cut at the Bank of England's April meeting. Reports last week showed languishing manufacturing, the largest trade deficit on record and feeble growth - all signs that cheaper borrowing costs are needed to buoy the economy. Inflation came in at its slowest pace since November 1994, showing there's scope to cut rates.

"Everyone knows we're flirting with recession in the first half," said Neil Ellerbeck, at Chase Asset Management. "Inflation is no problem. We need a more stimulatory policy." He expects a quarter point cut next month.

Friday, the pound fell to $1.6209 and rose to 0.6622 pound per euro. The military conflict in Yugoslavia carried sterling to its highest yet against the euro and extended its gain so far this year to 6.1 per cent. The pound could decline further against the dollar if conflict in the region intensifies. The dollar rose against major currencies on Friday as Nato began its third day of air strikes. Tension escalated as Russia said it would expel Nato's representative in Moscow in protest. The dollar was bought by investors looking for a safe haven.

The Bank of England has slashed 2 percentage points from rates in the past six months, driving it to 5.5 per cent to enliven growth. The bank's rate-setting Monetary Policy Committee next meets on 7 and 8 April. Sterling hasn't flinched in the face of rate cuts. Though lower rates usually weaken a currency, the pound has gained as the Bank of England's measures are seen guiding the economy towards recovery. Cuts totalling 125 basis points in the fourth quarter helped the economy expand 0.1 per cent from the previous three-month period. In Germany, where one move in December cut rates 30 basis points, the economy shrank 0.4 per cent.

"Even though the Bank of England will cut rates, I don't see the pound fluttering," said Gerard Lyons, the chief economist at DKB International.

"Interest rate cuts themselves are positive for the economy," he added.

A staunch pound is causing problems for exporters, whose products become more expensive on world markets as the currency appreciates. On Thursday, a survey by the CBI showed manufacturing is still in recession as export orders declined. A report on Wednesday showed the overall trade deficit widened in January to a record pounds 2.8bn.

On Tuesday, annual retail prices minus mortgage interest payments came in at a 2.4 per cent gain in the year ended in February, the slowest pace since November 1994 and below the government's 2.5 per cent target.

"Inflation is quite good and the numbers may go down," said Henrich Maass, an economist at Westdeutsche Landesbank Girozentrale in Frankfurt. "That means the MPC has room for lower interest rates."

This week, reports could show a drop in consumer borrowing and smaller increases in money supply, underlining the need for further easing. Both reports are due on Monday at 9.30am. Net consumer credit probably fell to pounds 1.08bn in February from 1.38bn.

News
news

Emergency call 'started off dumb, but got pretty serious'

News
people

Britain First criticised for using actress's memory to draw attention to their 'hate-filled home page'

Arts and Entertainment
JK Rowling is releasing a new Harry Potter story about Dolores Umbridge
booksJK Rowling to publish new story set in wizard's world for Halloween
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites those Star Wars rumours
PROMOTED VIDEO
News
Russell Brand was in typically combative form during his promotional interview with Newsnight's Evan Davis
people

Thought you'd seen it all after the Jeremy Paxman interview?

Arts and Entertainment
On The Apprentice, “serious” left the room many moons ago and yet still we watch
tv

Greatest mystery about the hit BBC1 show is how it continues to be made at all, writes Grace Dent

News
i100
Life and Style
tech

Voices
Funds raised from the sale of poppies help the members of the armed forces with financial difficulties
voicesLindsey German: The best way of protecting soldiers is to stop sending them into conflicts
Arts and Entertainment
A scene from David Ayer's 'Fury'
film

"History is violent," says the US Army tank commander Don "Wardaddy" Collier

News
ebooksAn unforgettable anthology of contemporary reportage
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

Data Analyst/Planning and Performance – Surrey – Up to £35k

£30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Markit EDM (CADIS) Developer

£50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

CTO / Chief Technology Officer

£100 - 125k: Guru Careers: A CTO / Chief Technology Officer is needed to join ...

Day In a Page

Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

Wilko Johnson, now the bad news

Former Dr Feelgood splits with manager after police investigate assault claims
Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

Mark Udall: The Democrat Senator with a fight on his hands

The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
New discoveries show more contact between far-flung prehistoric humans than had been thought

New discoveries show more contact between far-flung prehistoric humans than had been thought

Evidence found of contact between Easter Islanders and South America
Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

Cerys Matthews on Dylan Thomas

The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
DIY is not fun and we've finally realised this as a nation

Homebase closures: 'DIY is not fun'

Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

Air New Zealand's wizard in-flight video

The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

Pumpkin spice is the flavour of the month

The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
11 best sonic skincare brushes

11 best sonic skincare brushes

Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

Paul Scholes column

I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

While other sports are stalked by corruption, we are an easy target for the critics
Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker