The pound opened the trading week and quickly rose to an 8 month high against the euro as UK Chancellor George Osborne declared victory over his critics and rejected claims that he is simply creating a new consumer and housing bubble ahead of the 2015 general election.
Osborne argued that “The government’s continued fiscal credibility has allowed the UK authorities to pursue a strategy of monetary activism with schemes such as Funding for Lending that have supported a dramatic improvement in financial conditions. Changing course to boost government spending would be disastrous and set the UK back”.
Osborne also dismissed claims that he is engineering a new boom in the housing market by helping buyers raise a deposit stating that “This debate would benefit from a little less assertion and a little more examination of the evidence,”.
In recent weeks, data has shown that the manufacturing, services and construction sectors are all growing with net exports and investment all showing a strong pick-up.
Yesterday, a combination of uncertainty over the Federal Reserve’s plans and better than expected Chinese data helped stoke risk appetite, diminishing demand for the US dollar.
Figures out last Friday showed the US economy only added 169,000 new jobs in August, a much weaker figure than had been expected by analysts.
Overnight, Chinese industrial production expanded at 10.4% year-on-year in August, its fastest rate in 17 months and ahead of the rise of 9.9% forecast by economists. In addition, retail sales rose by 13.4% year-on-year while fixed asset investment advanced by 20.3% in the year to August.