Some are speculating that the Bank of England may strengthen the interest rate sometime soon in conjunction with the steady climb of the British exchange rate.
The Organisation for Economic Co-operations and Development (OECD) has predicted that the U.K. will lead its fellow G7 economies in growth during the first half of 2014, as reported on iForex.
The OECD forecasts the speed of economic recovery by the U.K. over the first six months this year will put it ahead of the U.S., Germany, Japan, France, Italy, and Canada, at an annual growth rate of 3.3 percent.
In comparison, the U.S. is expected to grow at an annual rate of 1.7 percent in the first quarter, followed by 3.1 percent in the second.
Manufacturing output in the U.K. increased by 3.3 percent, which is the strongest it has been over the past three years.
“The troubles in Ukraine, emerging market wobbles or, more parochially, the weather, are not likely to derail this recovery, which should continue and possibly strengthen,” said Rob Wood, chief UK economist at Berenberg.
In a separate report, the Office for National Statistics showed that heavy rains and massive flooding did little to sway Britain’s manufacturers from measurable recovery in January.
Factory output climbed steadily at a 0.4 percent rate per month from January onward, a stronger showing over economists’ predictions of 0.3 percent gains.
The unexpected large growth in manufacturing output was primarily driven by rubber and plastics, which on their own grew by 7.3 percent.
Other areas that drove growth include food, beverages, tobacco, and machinery and equipment. Losses were seen in pharmaceuticals, which dropped by 5.8 percent.
The increase in manufacturing output is believed to be a catapulting factor in driving the Sterling past the dollar.
Adding to the positive macroeconomic fundamentals, the International Monetary Fund forecasted a 2.9 percent expansion in the U.K. economy this year. Extra caution behind cutting stimulus funding in the U.S. was another factor that fueled the Sterling, keeping market traders’ eyes focused on trends with the upcoming announcement of unemployment metrics and inflation data in the U.K.
The National Institute of Economic and Social Research (NIESR) estimated that the UK economy grew by 0.8 percent during the three months leading into February and said GDP should rise above its pre-crisis peak later this year – it reached £392.7bn at the beginning of 2008.
“It can reasonably be expected that the peak will be regained within the next month or so,” NIESR said.
The NIESR also upgraded its U.K. growth forecast for 2014 from an earlier prediction of 2.5 percent to 2.9 percent. Growth estimates for 2015 were also bumped to 2.4 percent, from 2.1 percent, and expect this rate to hold for a solid two years.
With manufacturing and production in the lead and so many strong forecasts, the economy in the U.K. looks ready to launch strong into the remainder of the year.