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UK Seen At Rudest Financial Health Since Crisis, Growth Data Eyed

January 28, 2014

Traders will be fastening their seat belts for the advanced fourth-quarter growth data to rush out of the United Kingdom on Tuesday, expected to confirm the country as the strongest major economy in Europe . Data released today would mark the first full year when the UK sustained expansion in every quarter since the financial crises, bringing the Bank of England governor Mark Carney closer to completing what he calls the "first phase" of his low interest-rate policy. Figures from the Office for National Statistics may show today UK have grown by 0.7 percent in the three months to December, following growth of 0.8 percent in the third quarter. This represents an annual expansion of 2.8 percent, above the 1.9 percent growth in third quarter the strongest annual growth since 2007. This comes just days after the International Monetary Fund upgraded its outlook for the UK in 2014 to 2.4 percent from 1.9 percent, the biggest upward revision for any advanced economy and the second most optimistic prediction behind its outlook for the U.S. Data released last week, showed UK unemployment had fallen much faster than the Bank expected. Unemployment rate has taken another shock dive to 7.1 percent in November down from 7.4 percent in October, and now stands just a 0.1percent above the central bank's target for considering an interest rate rise. However, Carney and other BoE's officials, stressed the bank would still risk the economic recovery if it raised rates too soon, adding that recent return of inflation to its 2 percent target, gave the Bank room to wait before increasing rates. Consumer prices inflation fell to a surprise 2 percent in December for the first time in more than four years. Contents of the bank's minutes, also released last week at the same time as the unemployment figures, showed officials agreed it would not be right to raise rates as soon as the unemployment rate falls to 7 percent. As for the British Pound, the royal currency extended gains for a second straight day pushing the GBPUSD pair to trade around $1.66075 while recording the highest level of $1.66180 and lowest of $1.65698 and is most probably to gain further if data due today showed better than expected results.

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Source: Financial Markets

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