Rising UK Factory Gate Prices May Force BoE to End QE
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EUR/USD – German manufacturing orders jumped 4.3% in January led by a 7.1% improvement in domestic demand. Orders for machinery and equipment surged 10.0% in Europe’s largest economy which is a sign that companies have become more optimistic and are preparing for future growth. Unfortunately, Germany alone can’t lift the Euro-zone economy which saw modest growth of 0.1% in the fourth quarter. The ECB left their benchmark interest rate on hold and continue to see risks balanced between growth and inflation. To discuss this and other topics, please visit the EUR/USD forum.
GBP/USD – U.K. factory gate prices rose 4.1% in February from a year earlier, which was the most since December, 2008. Factories which continue to battle rising energy costs increases prices by 0.3% during the month as they try and pass on costs to the consumer. A look at the breakdown reveals that costs for food, tobacco and textiles rose. Inflation is above the BoE’s 3.0% threshold which may force policy makers to raise rates. The central bank is expecting inflation to ease as existing slack in the economy and tight credit markets puts downward pressure. A rate hold and pause of the asset purchase program signals that the MPC remains cautious. To discuss this and other topics, please visit the GBP/USD forum.
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