Sterling to remain weak ‘as markets lose faith in coalition’
“I don’t see where [UK] growth is going to come from and that will weigh on sterling. It will obviously hurt Ireland because the UK is still one of our biggest export markets. The UK might see a lift from weak sterling, but there won’t be any sustained recovery until a new government is in place.”
The economy is mired in a triple-dip recession since the Conservative Party-Liberal Democrat coalition took office in May 2010. There have been calls for George Osborne, chancellor of the exchequer, to row back on austerity policies.
Merrill Lynch economist, Nick Bate, notes that there is uncertainty over when the Bank of England will proceed with its next round of quantitative easing, which will release another £25bn (€28.5bn) into the economy. Inflation is running above the bank’s 2% target. Moreover, the next head of the Bank of England, Mark Carney, does not take up his position until June. So any decision may be postponed until then.
Mr Roche Kelly argues that the economy needs deep structural reforms to stoke growth, but there are no signs of these being implemented in the lifetime of this government.
US equities have rallied over the first three months. Positive US jobs data has added to the positive momentum. In addition to the improving employment outlook are the latest figures for capital goods orders, which is seen as a good base for further manufacturing sector growth. These are up significantly.
“What we are seeing is that risks have been removed from the US and eurozone economies, but what we really need to see from here is growth,” said Mr Roche Kelly.
He notes the uncertain Italian election caused a sell off in Italian equities and sovereign debt. But there was no contagion effect, which presaged a sell off in other periphery markets.
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