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

A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
ebooksAn evocation of the conflict through the eyes of those who lived through it
Dinosaurs Unleashed at the Eden Project
Arts and Entertainment
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home