CURRENCIES

THE POUND is poised to extend last week's 0.6 per cent gain against the dollar amid evidence that the UK economy is rebounding, while slumping US stocks and bonds weigh heavy on the dollar.

"The UK economy is strengthening and rates have bottomed," said Chris Iggo, chief international economist at Barclays Capital. In contrast, the dollar "has been under pressure across the board, and that should be supportive for the pound".

Against the dollar, the pound was trading at $1.6157 late on Friday, up from $1.6068 last week. It was little changed against the euro, with the single currency at 65.82p from 65.71p.

Traders are gearing up for reports this week on growth, trade and industry for indications how soon the Bank of England may raise interest rates. Evidence that economic activity is picking up pace could rekindle talk of rate rises before the end of the year, giving the pound a lift.

On Monday the Government releases a revision of second-quarter gross domestic product. Economists predict the report will show that the economy expanded 0.5 per cent in the second quarter compared with the previous three months, and grew 1.2 per cent in the year.

The trade report, due on Tuesday, is likely to show that the trade gap widened to pounds 2.2bn in June from a deficit of pounds 1.61bn in May. Separate figures are expected to show Britain's trade gap with countries outside the European Union narrowing to pounds 1.45bn in July, from pounds 1.66bn in June.

The UK reports on August industrial trends on Thursday. The previous report, released last month, indicated that manufacturers were more upbeat in July than they had been in almost two years.

Even as the economy revives, price pressures remain subdued, leaving some economists sceptical that the Bank of England will raise interest rates before next year.

"We think inflation is not going to reappear any time soon," said Tony Spence, at First Quadrant. "I'm not convinced we're in a boom period."

In the US, the Federal Reserve is expected to raise its benchmark interest rate to 5.25 per cent this week. Any signal that the rate move may not be the last will probably hurt US stocks and bonds, sapping demand for the dollar.

Still, if rates rise in the US, the target rate for overnight loans between banks will be above the Bank of England's benchmark rate for the first time since the Fed began using its rate as a benchmark for short-term lending. That renders the yield on dollar-denominated deposits more attractive than those on sterling deposits. That could cap the pound's gains.

The pound may fall against the European Union's single currency as recent suggestions that the euro region's recovery will accelerate brighten the outlook for the euro.

"There may be tough times ahead for the pound in the coming weeks" in the absence of rate rises in the UK and amid evidence of rebound in the euro-11 area, said Wolfgang Schulze, a trader at Landesbank Schleswig- Holstein. "For now, there's good news ahead" for the euro.

Bundesbank council member Ernst Welteke added to the rosy outlook, saying that the currency would rise further against the US dollar "as the end of the economic slump in Europe is in sight".

Start your day with The Independent, sign up for daily news emails
Life and Style
Fans line up at the AVNs, straining to capture a photo of their favourite star
life Tim Walker asks how much longer it can flesh out an existence
Life and Style
Every minute of every day, Twitter is awash with anger as we seek to let these organisations know precisely what we think of them
techWhen it comes to vitriol, no one on attracts our ire more than big businesses offering bad service
News
Professor David Nutt wants to change the way gravely ill patients are treated in Britain
people Why does a former Government tsar believe that mind-altering drugs have a place on prescription?
News
Norway’s ‘The Nordland Line – Minute by Minute, Season by Season’ continues the trend of slow TV
television
Arts and Entertainment
art
Sport
Jonny Evans has pleaded not guilty to an FA charge for spitting at Papiss Cisse
football
Life and Style
Kate Moss will make a cameo appearance in David Walliams' The Boy in the Dress
fashion
News
The image released by the Salvation Army, using 'The Dress'
news
Sport
Liverpool defender Kolo Toure
football Defender could make history in the FA Cup, but African Cup of Nations win means he's already content
ebooks
ebooksA special investigation by Andy McSmith
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

Recruitment Genius: Customer Relations Officer

£13000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Jemma Gent: Project Coordinator

£12 - £15 Hourly Rate: Jemma Gent: In this role you will report to the Head of...

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable