Bank of England leaves interest rates on hold at 0.5%

The Bank of England monetary policy committee (MPC) decided again yesterday that higher interest rates would not be a useful response to increased rates of tax and high inflation. The markets seemed happy to forgive Sterling for the MPC's failure to raise interest rates because it was never really expected to happen so soon. Sterling did spike lower but only briefly with investors focusing on next week's Inflation Report and the following week's MPC minutes to give them the excuse needed to push Sterling higher.

There was also little reaction to a slight -0.1% fall in UK manufacturing production during December and the broader industrial production figure, which was on target at 0.5%.

Perhaps investors were ready for poor numbers because of the awful December weather? Their mood toward Sterling would have been lightened following the National Institute of Economic Research (NIESR) forecast that GDP was at -0.1% during January.

In the hour and a half following the NIESR announcement Sterling went up by nearly a cent against the US Dollar. It was unable to hold onto the gain overnight as the markets are wary of the refusal by Egyptian president Mubarak to stand down.

Germany's January consumer price index data has started today's data releases, coming out at -0.4%, with the annual rate of inflation up from 1.7% to 2.0%.

The UK is next up with the producer price index figures which are expected to show a continuing squeeze on manufacturers' profits with costs expected to rise. In the US we have the trade figures for December and the University of Michigan releases its provisional index of consumer sentiment.