Currencies

THE POUND is expected to snap its recent decline with reports this week likely to show that exports are recovering, stoking growth and reviving the prospect of higher official interest rates.

Evidence of stronger exports could concern policymakers at the Bank of England, who have said a too-swift fall in the currency could stoke inflation. If the bank needs to raise interest rates to keep that from happening, it would boost the money-market return on sterling deposits.

"It's definitely our view that we'll get another rate rise and that's going to keep sterling buoyant, although I don't expect to see a big rally," said Mark Wall, a European economist at Deutsche Bank. He expects the pound to rise to DM2.90 within three month.

The pound on Friday was worth DM2.8686 or $1.6316, close to its lowest level since 31 October.

Economists expect a Confederation of British Industry survey, due on Thursday, to show that UK manufacturers are growing more confident as the pound's 13-pfennig decline this month boosts exports. A trade survey on Friday, meanwhile, is forecast to show that the UK deficit narrowed in March.

Last month, the CBI said confidence about export prospects among UK companies fell to its lowest for 18 years in the quarter to April as the strength of the British pound eroded exports.

By 1 April, the pound's two-year advance against a trade-weighted currency basket had topped 30 per cent, making exports more expensive abroad.

Since then, though, the pound has pared its gains against the currency basket to 23 per cent.

Most of that retracement came after the summit on European economic and monetary union boosted investor confidence in the euro, puncturing the safe-haven buying that had buoyed sterling.

In this week's figures, economists expect the global trade deficit to have narrowed to pounds 1.55bn in March, compared with a pounds 2.201 bn deficit in February.

The trade deficit with countries outside the European Union, however, will probably widen in April to pounds 1.2bn from pounds 1.104 bn in March.

"Because the worldwide figure is predicted to ease, we probably won't see a negative impact on sterling since it will offset the larger non- EU deficit," Mr Wall said.

The pound already began gaining back some ground on Friday, rising as high as DM 2.8770 after a survey showing rising retail employment stoked concern about inflation and higher interest rates.

A British Retail Consortium survey showed that employment in retail industries rose 2.4 per cent - or by 56,000 jobs - in the six months to March. With unemployment already at a record low of 4.80 per cent, an increase in jobs could send wages higher.

"The BRC survey points to further tightening in the labour market, and the market is taking that as a positive for sterling," said Ed Garston, a currency analyst at Idea market research.

A gross domestic product report, also released on Friday, did little to clarify the interest-rate outlook. Growth was in line with forecasts of a 2.9 per cent annual increase in the first quarter, unchanged from the fourth quarter. Still, that's higher than the Government's first estimate of 2.8 per cent.

The base lending rate is at a five-year high of 7.25 per cent, after five quarter-point rate rises last year.

Copyright: IOS & Bloomberg

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
News
news
Arts and Entertainment
musicHunter Davies has collected nearly a hundred original  manuscripts
News
news
PROMOTED VIDEO
New Articles
i100
Life and Style
lifeAiming to show breasts in a non-sexual way for cancer awareness
New Articles
i100... while following the referendum
News
ebooksAn unforgettable anthology of contemporary reportage
New Articles
i100... with this review
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
Arts and Entertainment
Nick Frost will star in the Doctor Who 2014 Christmas special
tvNick Frost, Natalie Gumede and Michael Troughton step up
Arts and Entertainment
Matthew Beard, Ben Schnetzer, Douglas Booth and Jack Farthing in ‘The Riot Club’
filmReview: Sheer nastiness of Riot Club takes you aback
Arts and Entertainment
tvBut something’s not quite right
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

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week