Exchange rate update

Yesterday morning the ECB released their monthly report, which like the BoE’s report on Wednesday highlights future inflation and growth forecasts. The ECB's latest Survey of Professional Forecasters (SPF) said that inflation levels are likely to remain below the ECB’s 2% target right through to 2011, with the annual forecast ranging between 1.7%-1.9%. These figures will give the ECB little reason to raise interest rates any time soon, much like the BoE as the central banks would typically combat low inflation with a rate cut as opposed to a rate hike. The SPF said that the Euro-zone would recover at a ‘gradual pace’ in 2010 with expected growth of 1% over the year. This reflects recent comments from ECB president Jean-Claude Trichet.

Industrial production in the Euro-zone rose for the fifth consecutive month as output increased by 0.3% from the month of September. Figures were slightly short of the 0.5% forecast but this still supports the view that the 16 countries are now collectively beginning to recover from their deepest recession since World War 2.

GDP (Gross Domestic Product) data for the Euro-zone is due out this morning at 10:00am, and is expected to confirm growth of 0.5% in the 3rd quarter of 2009 which will officially announce the Euro-zone as out of recession.