Angela Merkel has pleaded with Britain to remain a “strong voice” in the EU but warned that the country cannot expect special treatment if David Cameron embarks on a renegotiation of Britain’s membership terms after a Conservative election victory.
The German chancellor opened her speech to a joint session of parliament in English to drive home her message of Britain’s central role in the EU, coupled with a warning that the patience of the EU’s other 27 leaders with the UK is finite.
MPs and peers laughed as Merkel, who recalled her first visit to London in the spring of 1990 shortly after the fall of the Berlin Wall, said those expecting a “fundamental reform of the European architecture” in Britain’s direction would be disappointed.
The German chancellor gave little indication whether she would countenance a major revision of the Lisbon treaty – a key Cameron demand to allow him to table his demands – when she said simply that new eurozone governance arrangements would be introduced through the “necessary legal instruments”.
But in the final flourish of her speech, also delivered in English, Merkel said Germany regarded Britain as a vital ally in reforming the EU. “We need a strong United Kingdom with a strong voice inside the EU,” she said. “If we have that we will be able to make the necessary changes for the benefit of all.”
via The Guardian
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The Bank of England would never give “time-specific” guidance on the U.K’s first interest rate hike, Ben Broadbent, Bank of England monetary policy committee member — and rumored leading contender for the deputy governorship — told CNBC.
Broadbent told CNBC that there is “too much focus” on the interest rate hike amid speculation that the central bank could raise rates in the first half of 2015.
“We have never given, would not want to give, and are not giving time-specific guidance about when this happens. I might also say that I think there’s too much focus on this particular date,” Broadbent told CNBC.
Improving economic data in the U.K. since last year has increased expectations the Bank of England will look to raise its main interest rate. This measure is a benchmark for mortgages and savers all over the U.K. and was originally tied to the unemployment rate.
The U.K.’s official statistics office on Wednesday confirmed the country’s gross domestic product rose 0.7 percent in the last three months of 2013 from the previous quarter, while business investment picked up sharply in the same period.
Bank of England Governor Mark Carney unveiled the “next phase” of his forward guidance in February after a sharp fall in jobless numbers took the central bank by surprise. In a surprise to some analysts, Carney’s “second phase” of forward guidance did not link a rate hike to any specific indicators.
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Fears of a bank run in Ukraine are rising, as central bank reserves sink and some 7 percent of bank deposits were lost in just 3 days.
Ukraine’s reserves currently sit at $15 billion, according to the country’s newly appointed central bank governor, Stepan Kubiv. Kubiv said 7 percent of deposits, or 30 billion hryvnias ($3.3 billion), were lost between February 18-20, when the violence in the country reached its zenith and snipers opened fire on protesters.
Goldman Sachs has estimated the country’s foreign currency reserves have declined to $12 – $14 billion.
The central bank is considering providing loans to five of the country’s banks, according to analysts, in order to prevent a bank run – when a large number of customers withdraw money simultaneously, increasing the likelihood of the bank running out of funds.
Reuters reported later on Wednesday that the central bank was taking measures to stop capital flight from the country.
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Bank of England officials have been talking up the strength of the UK recovery as the latest round of business surveys show rising confidence and the FTSE 100 closes in on a record high.
Ahead of the publication of official data this week that is expected to confirm robust growth, Bank governor Mark Carney highlighted Britain’s lead over other major economies after he attended the G20 summit in Sydney.
With the FTSE 100 index of blue chip shares about 100 points off an all-time high set 14 years ago, Carney sought to give much of the credit for the UK’s recovery to his forward guidance policy. Under that scheme he had vowed not to consider an interest rate rise at least until unemployment fell to 7%. The jobless rate has come down faster than the Bank expected and in the face of criticism Carney overhauled the policy earlier this month.
The UK’s recovery has been more rapid than most economists would have expected this time last year, when the ratings agency Moody’s delivered a blow to the chancellor, George Osborne, by stripping the country of its top AAA credit score. But the latest release of GDP data on Wednesday – expected to confirm a 0.7% expansion in the fourth quarter – will be scrutinised for any slowdown in the consumer spending that has been fuelling growth.
via The Guardian
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China home prices have suggested a potential cooling-off in the housing sector at the start of this year.
Average new home prices in China’s 70 major cities rose 9.6% in January from one year ago, easing from December’s 9.9% increase.
This is the first slowdown in the rate of price increases in 14 months, since November 2012.
Home prices in top-tier cities Beijing and Shanghai also rose in January, but at a slower rate from December.
Property purchases remain a popular investment choice in China, and that kept prices rising in 2013.
But the momentum slowed down late last year, after the People’s Bank of China, the central bank, progressively tightened monetary conditions to rein in excessive lending growth.
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The Bank of England hinted on Wednesday that interest rates may need to start rising in just over a year as it broadened its guidance on when it will consider the economy to be healthy enough to cope with higher borrowing costs.
The BoE sharply revised up its forecasts for growth over the next three years, recognizing the surprise transformation of Britain’s growth prospects in 2013.
It said market expectations of a rate hike in the second quarter of 2015 – around the time of a general election in May – were in line with its aim to keep inflation at 2 percent.
But the BoE also said there was enough spare capacity, or slack in the economy, for now to keep rates at an all-time record low level of 0.5 percent without risking a surge in inflation.
It added that any increases in borrowing costs would be gentle.
“The message to businesses, to households is that the Bank rate is going to follow a path that is consistent with jobs, with incomes and with spending growing in a sustainable way,” Governor Mark Carney said.
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One of Britain’s top business lobbying organizations has upped its economic forecasts for the U.K., arguing that growth will be boosted by a hike in business investment and exports.
The CBI (Confederation of British Industry), which represents around 240,000 businesses, said on Tuesday that it expected the economy to expand by 2.6 percent in 2014 – up from its earlier forecast of 2.4 percent. Next year, economic growth is seen at 2.5 percent, slightly lower than the 2.6 percent previous expected.
The economic expansion will be driven by a hike in business investment, which is expected to make a positive contribution to growth this year, according to the CBI. Business investment growth is seen rising 6.6 percent this year and 8.3 percent in 2015, having fallen by 3.7 percent in 2013.
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The Australian dollar received a leg up on Tuesday after an upbeat local business survey helped the currency break a key chart barrier, and investors were awaiting testimony by the new chief of the U.S. Federal Reserve.
The Aussie leapt to its highest in a month at $0.9016, from $0.8942 in early trade, and was last at $0.9007. A sustained break above major chart resistance at 90 cents would target the 2014 peak of $0.9087.
It found support after a measure of Australian business conditions rose to its highest in nearly three years in January. The private survey also showed firms felt more confident about the outlook for orders and employment.
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GBP/USD for Thursday, February 6, 2014
Over the last couple of days the GBP/USD has been able to steady and hold ground above the support level at 1.6250 and rally a little back towards 1.6350. Over the last week the pound has fallen sharply and experienced its worst one week fall this year which has resulted in moving to the six week low near the current support level at 1.6250. Over the last couple of months the pound has established and traded within a trading range roughly around the key level of 1.6450, whilst moving down to support at 1.6250 and up to 1.66. Over the last few weeks or so the pound has moved very strongly pushing through resistance levels at 1.6450 and more recently at 1.66 however it has since returned those gains. The 1.66 level has become quite significant as it had been looming large over the last month or so and a couple of weeks ago it moved through, reaching a new multi-year high close to 1.6670. Since that time however it has retraced strongly and moved back below the 1.66 level only to be rejected again over the last week before falling sharply again to below 1.6450.
Several weeks ago it rallied again trying to break through the 1.6450 level before dropping back to a support level at 1.6350. In late November it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. This level continues to play a role in providing support. In early November, the pound bounced strongly off the support level at 1.59 to return back to above 1.6250. Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days.
Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
British construction activity unexpectedly picked up more speed in January, with growth reaching its highest level since the financial crisis, a survey of purchasing managers showed on Tuesday. The Markit/CIPS construction PMI rose to 64.6 in January from December’s reading of 62.1, the sharpest expansion in UK construction activity since August 2007, when the financial crisis first started to take hold in Britain. The number far exceeded economists’ forecasts in a Reuters poll for a reading of 61.5, and was well above the 50 mark that separates growth from contraction. “January’s survey provides reassurance that the UK construction recovery remains on track,” said Tim Moore, senior economist with Markit, which compiles the data. The building industry was hammered by the financial crisis of 2007-09. The pick-up in construction comes as Britain’s housing market has been boosted by falling unemployment, low interest rates and government programmes.
(Daily chart / 4 hourly chart below)
GBP/USD February 5 at 22:55 GMT 1.6312 H: 1.6341 L: 1.6252
The pound stayed below $1.66 after a report showed the pace of Britain’s fourth-quarter economic expansion fell short of some analysts’ expectations.
Sterling pared its advance versus the euro and declined against 10 of its 16 major peers. U.K. government bonds stayed lower after the report, which showed gross domestic product increased 0.7 percent in the fourth quarter, matching the median forecast of economists in a Bloomberg News survey. Estimates ranged from 0.3 percent to 1 percent, with almost half of the 39 economists surveyed predicting growth of more than 0.7 percent.
“Some market participants were sensing risks to the upside, and so the in-line print disappointed,” said Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London. “It’s still a good print and I would expect cable to recover in the longer term,” he said, referring to the pound-dollar exchange rate.
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