British Pound May Benefit From Revised 4Q Growth Figures

In addition, the BoE held a neutral outlook for future policy and said there wasn’t “an immediate need for further relaxation,”, and noted that the recent rise in inflation was merely a “temporary deviation” as underlying price pressures remain to the “downside.” At the same time, BoE Governor Mervyn King continued to see a “substantial margin” of slack in his letter to Chancellor of the Exchequer Alistair Darling, but went onto say that he would be willing to tighten policy if price pressures continue to intensify over the medium-term. As a result, the ongoing weakness in the private sector paired with the deterioration in the labor market is likely to weigh on the prospects for future growth, which could certainly dampen price pressures over the coming months, and the central bank may adopt a wait-and-see approach throughout the first-half of the year as they assess the impact of the emergency measures.

Nevertheless, the economic docket for the following week is expected to encourage an improved outlook for the U.K. as market participants project the preliminary 4Q GDP reading to show a 0.2% expansion in economic activity, while business investments are expected to increase 0.1% during the same period after contracting 0.6% during the three-months through September. However, consumer confidence is anticipated to have stalled in February following the rebound in the previous month, and households may lower their outlook for the economy as they continue to face tightening credit conditions paired with the deterioration in the labor market. - DS