- Peter Spencer, chief economic adviser to the EY Item Club
After trading in boundaries of the double top pattern for almost a month, the cable penetrated the lower boundary last Friday and is now trading around 1.7078. Despite a temporary weakness the Sterling is projected to strengthen against other major currencies closer to the end of this week, as a report from the ONS is expected to point at further strengthening. A move above recent high of 1.7192 will put monthly R1 at 1.7249 on the map.
The U.K. economic output shrank more than 7% from a high of 392 billion pounds to less than 365 billion in early 2009, and up to now GDP struggled to reach that level again. Friday's estimates from the ONS are predicted to show an expansion of more than 393 billion in the second quarter of 2014. At the same time, quarterly growth will remain unchanged at 0.8%. Ahead of the high importance report, the EY Item Club claimed that economic output will rise by 3.1% over this year, posting the most impressive growth among other G7 nations. Earlier the economy was blamed for the extremely high level of dependence on the private consumption and savings rate. However, the Club predicts capital spending by businesses will post a 12.5% increase this year, reducing the reliance on consumer spending. It means that future growth will be more balanced and sustainable, as expansion will be supported by an increase in the number of people in the workforce, not just consumers borrowing or a growth in wages.
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