Eurozone debt issues in the news again
If only everything in life was as predictable as a Bank of England interest rate decision. The market had expected rates to remain on hold and the MPC did not disappoint – keeping rates at their historical lows of 0.5% for another month. As the saying goes though, the devil will be in the details when the BOE release their monthly meeting minutes on the 23rd of this month. Now, it is most likely that those who voted for a rate hike last month will do so again. The major factor will be if this group have managed to convince another committee member to join them in voting for a rate rise and although the relatively weak service sector figures may have reduced this likelihood, it is definitely worth keeping this date in the diary.
The one particular bright spot in the UK economy is manufacturing and yesterday’s manufacturing production figures reiterated its strength, posting 1.0% growth from the previous month. Industrial production also showed solid growth of 0.5% and just when you think the figures couldn’t get much better the UK released a vastly improved trade balance figure – with the overall deficit balance reducing from £7057 million in January to £2950 million in February. Overall, a positive day for UK releases and long may it continue.
This is more than can be said of the euro zone however, with today’s EU Summit intended to put in place a firm plan to resolve the EU‘s sovereign debt crisis – the omens are not looking good. Germany along with other member states appears to be digging their heels in and refusing to budge on demands from countries that require support, most notably Ireland and Portugal. Ireland whose new government has been trying to renegotiate conditions of their bailout may have a very tough task with Germany’s Angela Merkel thought to be less than sympathetic. To add to the euro zone’s woes, Spain had its credit rating downgraded yesterday by Moody’s rating agency. Now, who thought joining the euro was good idea!
In morning trading, the pound was down against the euro at 1.1603 with the effects of yesterday decision to keep rates on hold weighing on the pound. This also brought the pound down against the dollar with GBP/USD at 1.6029. The dollar was also benefitting from safe haven support as the Middle East crisis continues to concern investors.