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Pound Slumps Again

Currencies Direct February 14th 2013 - 2 minute read

The pound slumped once again in
yesterdays trading following the Quarterly Inflation Report. 
Although Mervyn King was upbeat in his view that the UK economy is
on the path to growth (albeit slow and steady) it did not stop the
pound taking a beating against the Euro and the USD.  The Bank
raised its inflation forecast which is now expected to remain over
2% for 2 years and made it clear that they are willing to tolerate
higher inflation which they see as stubborn but temporary. 
They noted that the recent fall in the pound which has fallen over
6% against the Euro and over 4% against the USD has been a
contributory factor in raising their inflation forecasts.  The
pound fell on the news as the market does not see any monetary
tightening on the horizon- in fact there is scope for more stimulus
if required, although King did note that stimulus alone is not a
panacea.

It has been a bad morning for the
Euro against the USD after weaker than expected Q4 GDP data from
France and Germany and Italy.  We have Eurozone GDP as a whole
at 10:00 GMT and currently the Euro is on the back foot so we await
this news with interest.

The Bank Of Japan left policy
measures unchanged as expected with the decision coming after
weaker than expected Q4 GDP data.  It was also revealed that
the likely candidate for the next BOJ governor stated that the
Japanese inflation target would not be attainable without further
JPY weakness targeting 100.

The focus today will be on the G20
discussions in Moscow and in particular on the subject of currency
wars.  It will be interesting to see if tomorrow we get a
clarifying statement on exchange rates and associated monetary
policy as the G7 comments have led to confusion on this matter.

Written by
Currencies Direct

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