The UK’s dominant service sector picked up according to data released. The PMI index climbed to 57.2 in January from Decembers 55.8 reading. As the service sector makes up 79% of the UK’s output, the boost to the service sector should end any fears of a lull in the UK economic growth. Meanwhile, the UK’s growth slowed in the final 3 months of 2014. The quarterly growth rate in GDP slipped to 0.5%, down from the previous 3 months of 0.7%. It was no great surprise the Bank of England has held interest rates at 0.5% for the 71st month in a row and kept its stimulus programme of quantitative easing (QE) unchanged. Figures showed that last month the UK economy grew by a slower-than-expected 0.5% in the last three months of 2014. Low oil prices and falling food inflation in the UK have also removed any pressure on the Bank to raise interest rates.
The Conservative-led government's hopes of exports playing a greater role in the economy have been frustrated by persistent weakness in the euro zone, Britain's largest export market. That seems unlikely to change before a national election on May 7. But there are signs that exporters are being helped by the fall in the value of the pound in the second half of last year. Export volumes jumped 2.4 percent in December. A survey last week showed British manufacturing export order growth hit a five-month high in January. December's deficit was pushed up by a nearly 40 percent leap in oil import volumes, reversing a trend of falling imports.
The new Finance Minister of Greece Yanis Varoufakis met up with around 100 banks and financial institutions, elaborating that Greece will be able to facilitate its debt with no detrimental impact on its private investors and bond holders. George Osborne, the UK chancellor did state that he wants the new Greek minister to act responsibly however it is crucial that the eurozone has a better plan for its jobs and growth. He also stated that it is a rising threat to the British economy and at some point, there has to be a growth strategy in order to pay off their debts and reduce some of their deficits.
The European Central Bank heaped pressure on Greece’s new government by restricting access to its direct liquidity lines, citing concerns about the country’s commitment to existing bailout pledges. This means that Athens’ own central bank must finance the country’s lenders, isolating Greece from the rest of the Eurozone bloc. The decision marks an escalating stand-off between Greek politicians and other officials in the euro area. It came hours after new Greek Finance Minister Yanis Varoufakis met ECB President Mario Draghi to gather support for his government’s plans to tear up its 240 billion-euro ($272 billion) rescue package and renegotiate the nation’s debt.
New orders for U.S. factory goods fell for a fifth straight month in December, but a smaller than previously reported drop in business spending plans supported views of a rebound in the months ahead. The Commerce Department said new orders for manufactured goods declined 3.4 percent as demand fell across a broad sector of industries. Manufacturing is slowing, constrained by weakening global demand and falling crude oil prices, which have caused some companies in the energy sector to either delay or cut back on capital expenditure projects. Business spending on equipment in the fourth quarter was the weakest since mid-2009. The soft trend in business investment likely persisted early into the first quarter, with a reports showing a manufacturing sector gauge falling in January.
The US Dollar weakened on the back of worse than expected ADP Employment change figures. The reading was expected to come in at 225k but fell short at 213k.
