End of a another unloved week for the Pound

The Pound has endured another unloved week. End of a another unloved week for the PoundComments made by the Bank of England governor Mervyn King were the catalyst of the move lower against the Dollar, where we hit a six month low, and the euro.

But I would suggest it was merely confirmation of what we all really knew, the UK economy is slowly getting better, but it will be a long and frustrating journey.

The reason we are now at new lows is because higher inflation is being tolerated explicitly by the bank in pursuit of growth, and because “rebalancing via external demand” was twice quoted in the inflation report and the money markets have interpreted that as the BoE pursuing a lower exchange rate to achieve this.

The euro and Dollar remain locked in an arm wrestle.

Disappointing GDP numbers yesterday from the Euro zone has pulled the Euro slightly lower, but the combination of large inflows back into the Euro up against a US economy slowly recovering is keeping both currencies well bid.

The outlook for Sterling next week should be slightly more stable, but the Bank of England and Federal Reserve both publishing their respective minutes on Wednesday from earlier this month there is scope for movement.

However, with no change in policy or outlook expected from either a brief pause for Sterling is more likely at this stage. Other key data next week is both German and US CPI & PPI in the middle of the week.

Leave a Reply