The pound gained some traction on Wednesday having slipped to its lowest level (1.3055) in almost two weeks versus the dollar the previous day – climbing to the 1.31 mid-range as the US currency weakened.
Bank of England (BoE) Deputy Governor Ben Broadbent had some cautionary words for policymakers on Wednesday, who he said should be clear about how they plan to react to changes in the economy – warning against guidance that could be viewed as promises about future policy action.
Speaking at the National Institute of Economic and Social Research, Broadbent said: “Expectations of future interest rates affect current demand and policymakers clearly have an interest in their behaving appropriately as economic news comes in,”
Investors were left questioning the BoE’s communication strategy last year after they were wrong-footed by the central bank’s policy outlook.
The UK economy grew by 1.3% at the end of 2021 despite a cost-of-living squeeze on household spending – and is now estimated to be 0.1% below its pre-pandemic level. The consensus expected it to post a 1% increase.
Official figures from the Office for National Statistics (ONS) on Thursday showed that GDP rebounded in the fourth quarter of last year.
The domestic economy took a barrage of blows during the pandemic with businesses forced to close amid lockdown restrictions. But the economy has mounted a recovery since – and at a time when millions of families are grappling with soaring consumer prices.
Dollar weakened by Ukraine optimism
The breaks were applied to the safe-haven dollar’s momentum on Wednesday by optimism about peace talks in Ukraine.
Renewed hopes for a diplomatic solution to the conflict caused risk appetite to rise following reports indicating a de-escalation of Russian attacks around Kyiv and Chernihiv.
Private employers in the US continued hiring at a brisk pace this month, boosting the labour market recovery. Payrolls jumped by 455,000 jobs the ADP National Employment Report showed on Wednesday – exceeding forecasts. Economists had predicted payrolls would increase by 450,000 jobs.
The US economy expanded at an encouraging 6.9% annual pace in the fourth quarter of last year, the US Bureau of Economic Analysis reported on Wednesday – a marginal downgrade from its previous 7% estimate.
The nation’s GDP for the whole of last year increased by 5.7%, which represents the fastest calendar-year growth since 1984.
A clutch of influential economic indicators are pencilled in the US economic calendar today: core personal consumption expenditures price index, initial jobless claims for the week ended 25 March, personal income, personal spending and the Chicago purchasing managers’ index.
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