The pound came under pressure yesterday as investors digested a mixed bag of messages from the Bank of England’s latest update, while the benchmark FTSE stock index trod water.
Sterling also suffered from news of falling industrial production in Britain and a widening of the country’s trade deficit.
The FTSE 100 was flat at 7,386.63 points, Frankfurt’s DAX 30 was down 0.4% at 12,711.06, Paris’ CAC 40 was down 0.3% at 5,383.42 points and the EURO STOXX 50 was down 0.5% at 3,623.55 points yesterday.
The Bank of England kept leading interest rates unchanged and stimulus measures in place, but also crimped its economic growth forecasts.
While noting that the pound cannot expect any immediate support from higher interest rates, analysts still detected a slightly more aggressive tone from the central bank on rate policy further down the road.
Ahead of the update, official data showed that UK industrial output slipped 0.5% in March to record a third monthly drop in a row.
While the trade deficit hit a six-month high in March on rising imports, “there are signs that UK exports are benefiting from the weakened pound as well as decent global growth”, Archer added.
Other European markets were also softer as “global political uncertainty continues to fester” as Charles Schwab analysts put it.
Wall Street was lower approaching midday in New York after a disappointing earnings report from Macy’s pointed to weakness in the American retail sector.
Earlier, Asian stocks were having a good day, with energy firms providing strong support after a jump in oil prices, while the dollar firmed against the yen as a top Federal Reserve official reinforced expectations for further US interest rate hikes.
Both main crude contracts extended Wednesday’s strong gains seen after data showed a drop in US inventories almost three times more than forecast, fanning hopes of rising demand as the American holiday driving season kicks off.
Traders have also been buoyed by hopes that Opec and Russia’s much-vaunted output cuts that started in January appear to be gaining traction, with the key producers also likely to extend the agreement past its end-June deadline.
And yesterday, the Opec called on oil producers to make “collective efforts” to match supply and demand in the oil market in the face of rising output in the US.
All of which is welcome news for oil traders after last week’s plunge in prices that came on the back of worries about rising US, Nigeria and Libya output, and a slowdown in key market China.
The Sterling pound suffered from news of falling industrial production in Britain and a widening of the country’s trade deficit.
