Data point to continued growth in Germany and rate hikes in UK

The Conference Board's leading index for Germany points towards further growth for the economy.

The Conference Board announced today that the leading index for Germany increased 0.8 percent and the coincident index increased 0.3 percent in February... Based on revised data, this index increased 0.2 percent in January and increased 0.2 percent in December. During the six-month span through February, the leading index increased 0.3 percent, with four of the eight components increasing (diffusion index, six-month span equals 57.1 percent).

The latest ZEW indicator released on Tuesday is pointing in the same direction.

The recovery of the ZEW Indicator of Economic Sentiment for Germany gained momentum in April 2007. The indicator rose by 10.7 points and now stands at 16.5 points after 5.8 points in March. This is still far below its historical average of 33.1 points.

The euro zone is expected to do well too.

Economic expectations for the euro zone have increased as well. The indicator rose by 5.6 points and now stands at 10.7 points...

These indicators add weight to the view that the European Central Bank will be raising rates soon.

However, for the moment, the focus appears to be more on the Bank of England. From Reuters:

Wages rose at their fastest rate in almost three years in February, reinforcing expectations interest rates will rise not only next month but again after that.

And minutes of the Bank of England's April meeting showed policymakers were worried about price pressures even before news of last month's surge in inflation that forced Bank Governor Mervyn King to explain himself to the government.

Consumer price inflation rose to 3.1 percent last month, its highest since comparable records began a decade ago. Retail price inflation, on which most pay deals are based, hit its highest in nearly 16 years, meaning wage pressures are likely to increase.

That is putting strong upward pressure on sterling.

Sterling surged to its highest level in more than a quarter of a century above US$2.01 on Wednesday as strong pay numbers bolstered expectations that interest rates are set to rise further.