UK Data continues to outperform

Today's Highlights

IMF upgrades growth forecast for the UK

FOMC minutes the focus this evening

FX Market Overview

The news from out of the UK was mainly upbeat as Industrial production outperformed in February surprising on the upside with a growth rate 2.9% m/m and 2.7% y/y. The data underscored the broad trend of recovery in the sector. They are undoubtedly strong figures although it is worth noting that manufacturing output is still 8% below its January 2008 peak. As always it will be the all-important service sector that drives Q1 growth.

The good news kept on coming in the UK as the IMF reported that the UK economy is growing at the fastest pace in the developed world. They now think that GDP will grow by 2.9% this year, up from 2.4% in January which would be faster than the US, Canada and Germany. The pound which was already pretty buoyant is now trading at much higher levels versus the dollar and the Euro and this looks set to continue.

In the Eurozone policy makers yesterday emphasised a willingness to act if inflation remains low with France's Noyer adding that he would welcome a weaker Euro. The Euro does seem stubbornly strong in the short term as we await further news and April's inflation data will now be very closely watched. Most analysts expect the ECB to act at some point in Q2 and with a light data diary ahead speeches from ECB council members later today will be monitored for any clues as to the exact timing of any easing.

Today's focus will be in the US as the Federal Reserve release the minutes from the latest policy setting meeting. The dollar has continued to lose ground after Friday's Non-Farm payroll release but it may garner some support this afternoon. Janet Yellen, Chairperson of the Fed has tried to walk back her hawkish statement from the last meeting but it is likely that some members have moved their projections for rate hikes forward and this may well be communicated via the minutes. The dollar may find some near term support and it may be a good idea for dollar buyers to reduce near term exposure around current levels.

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