IMF raises forecast of UK's economic growth

Paresh Davdra is the Dealing Director of RationalFX, Currency Specialists. Wednesday 01st February 2017 09:56 EST

Manufacturing in the Eurozone started 2017 with a bang yesterday after figures showed the biggest ramp-up in production across the bloc for five years.

The purchasing managers’ index (PMI) data for Eurozone factories reached 54.9, comfortably above the 50 mark that separates growth from contraction.

The data revealed PMI readings improved in all nations covered, with growth being strongest in the Netherlands and  Austria. PMI indices hit a near three-year high in Germany, an 11-month peak in Spain and a 67-month record in France.

With widely attributing much of the upturn in demand to the depreciation of the euro, the strong end to 2016 is encouraging news.

Early in January the UK’s ambassador to the European Union, Sir Ivan Rogers, unexpectedly resigned, adding to confusion over Prime Minister Theresa May’s Brexit plans.
Sir Ivan, who was appointed by David Cameron in 2013, was expected to play a key role in the Brexit negotiations due to start in a few months. He was due to remain in his post until November 2017, and has been widely seen as one of the UK’s most experienced EU negotiators.
Last month, May’s office downplayed remarks that had been attributed to Rogers, saying that it might take 10 years to negotiate a free-trade deal with the EU. He privately told ministers that this view was shared by the EU’s other 27 member states.
This news has brought renewed concerns that that the UK may get a worse deal than they would have if he remained part of the team.

The Pound gained significant ground against its major counterpart’s on the 18th of January when Prime Minister Theresa May used her much-anticipated speech to announce her priorities for Brexit negotiations.
May promised to push for the "freest possible trade" with European countries and to sign new deals with others around the world whilst confirming that the UK "cannot possibly" remain within the European single market. The prime minister also announced Parliament would get to vote on the final deal agreed between the UK and the EU.
The IMF also raised its forecast for the UK's economic growth this year, following a better than expected economic performance since the Brexit vote. The IMF says it now expects the UK to grow by 1.5% this year, compared with the 1.1% it was previously forecasting. The Fund said the upgrade was due to “a stronger than expected performance during the latter part of 2016”.
After much anticipation we had Donald Trump's inauguration day when he entered the White House as the 45th President of the United States. The dollar edged down as investors were underwhelmed by the limited scope of executive actions and the lack of concrete policy reforms in the inauguration speech of newly sworn-in U.S. President Donald Trump.
Investors had been looking to Trump's first address as president to highlight his plans for fiscal spending, tax cuts and regulatory reforms. Instead, Trump focused his remarks on his "America first" policies this worried investors as it raises concerns over US protectionism that could slow US growth.
The UK Government also lost their article 50 case, with the Supreme Court ruling that the government must go through parliament, but not its regional assemblies, to trigger talks on leaving the European Union. The pound hit 5-week highs after the first sections of the ruling were read, but was then hit by a wave of profit-taking by investors, fuelled in part by worries over how Irish and Scottish politicians and public will now proceed.
Scottish First Minister Nicola Sturgeon said she would bring a motion of consent to Edinburgh's devolved assembly despite the ruling that the government did not need to ask for its approval, or that of the Northern Irish equivalent.
Sterling drew support last year from the original ruling in London's High Court which was perceived to support the pro-EU forces in parliament who are demanding a "softer" Brexit that prioritises maintaining membership of the bloc's lucrative single market. However, many market participants said the decision on Tuesday had already been factored into sterling and that it cleared the way for Prime Minister Theresa May to proceed with a "hard" Brexit by seeking approval only from Westminster and not the pro-EU regions.

The Pound strengthened again on the 26th of January after Theresa May announced the government would set out their Brexit plans in a formal policy document. The bill is expected to rushed through both Houses of Parliament within weeks in order to meet the Prime Minister's deadline for triggering Article 50 by the end of March.
Adding to Sterling’s strength were hopes that Mrs May’s first meeting with Donald Trump would pave the way for a US trade deal. The meeting is set to take place this weekend.

German business survey released on Wednesday morning revealed that morale fell unexpectedly in January, hitting its lowest level since September, in a sign that company executives were less upbeat about the growth prospects of Europe's largest economy at the start of 2017.

The UK’s growth figure for the end of 2016 showed the British economy continued it’s momentum, with a better-than-expected set of growth figures for the fourth quarter. The UK's gross domestic product expanded by 0.6 percent quarter-on-quarter in the three months to December, the same rate of growth as the previous two quarters. Analysts had been predicting a 0.5 percent rise for the fourth quarter. A closer look at the figures showed that the services sector was seen as a key contributor to the growth figures, with a 0.8 percent quarter-on-quarter increase. Manufacturing also delivered strong growth numbers, rising 0.7 percent. However, production and construction output remained relatively flat.

comments powered by Disqus

to the free, weekly Asian Voice email newsletter