The pound rose strongly in thin trading on growing confidence that economic recovery is under way, gaining half a point against a basket of other currencies to close at 79.3 per cent of its 1985 value. Hopes that the pound would receive further impetus from cuts in German interest rates were tempered by disappointing German inflation figures.
Sterling was boosted by Thursday's industrial trends survey from the Confederation of British Industry, which showed the largest number of firms expecting to step up production since May last year. The CBI also doubled its forecast of economic growth this year to 1.4 per cent.
The pound rose by 1.35 pfennigs to DM2.4332 and gained 1.8 cents to dollars 1.4920. The dollar dropped by just under a pfennig to DM1.6340. The dollar was little affected by the US Commerce Department's slight downward revision to fourth-quarter growth, taking the annual rate to 4.7 per cent. Dealers are now looking forward to next month's first quarter figures, expected to show an annualised growth rate of between 1 and 3 per cent.
The commerce department also announced that US corporate profits rose by 9.2 per cent in the fourth quarter, the sharpest increase for five years.
Engineering sales rose slightly in January to 120 per cent of their 1985 level, the highest since January 1991, after adjusting for normal seasonal effects. Export sales were unchanged on the month at 155 per cent of the 1985 level.
The monthly engineering figures are particularly erratic - the more reliable three-month on three-month comparison showed an 8.5 per cent increase in export sales, the biggest since records began in 1985.
The picture was very different for new orders, which were down by almost a quarter on the month to their lowest for two years. New orders were unchanged in the last three months, with new export orders down by 4.5 per cent in the last three months.
Hopes that western Germany's comparatively high inflation rate had peaked were dashed with provisional figures showing a 4.3 or 4.4 per cent increase for March.
Utility charges and rents have continued to push the cost of living upwards.Reuse content