Sterling recovers - but will it last?
Yesterdays’ trading saw sterling gain some ground against the Euro and a basket of major currencies; a rare event in recent weeks.
However even after France yesterday announced its economy had contracted by 0.5% in the 4th Quarter, the last of Europe’s 3 major economies to announce such move one may have expected a larger gain.
George Osborne’s recent comments may be of concern for anyone with a need to purchase Euros or any currency. His warning was of a collapse of sterling, saying it is his job to tell the public the truth about the economyOfficial figures show that UK inflation fell in October from a 16-year high, as oil and transport costs - as well as food prices - fell.
Inflation
The Consumer Prices Index (CPI) measure dropped to 4.5% from 5.2% in September.
The Office for National Statistics says the month-on-month fall in the CPI figure is the biggest drop in 16 years. The Bank of England has said inflation could fall below its target of 2% next year - and might drop as low as 1%.
This year, the UK economy shrank for the first time since 1992 - falling by 0.5% in the third quarter of 2008. This led the Bank of England to lower its key Bank Rate in October by 1.5 percentage points - to 3% from 4.5% - its lowest level since 1955.
David Kern, chief economist at the British Chambers of Commerce, said: “Following these [inflation] figures, it is clear that UK interest rates will be cut further, most likely to 2% in early 2009.
“One cannot rule out rate cuts below 2% later next year.”- as regular readers will know, lower interest rates will likely result in a weaker pound, and with it lower exchange rates. Watch out!
Data of note.
Watch out for the Bank of England minutes released tomorrow at 09:30am. This will show the minutes of the recent meeting where the Bank of England slashed rates by 1.5%.
The minutes of the BoE MPC meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee.
If the BoE is hawkish about the inflationary outlook for the economy, then the markets see a higher possibility of a rate increase, and that is positive for the GBP.
Also lots of data from the US tomorrow, so expect cable volatility. This is a brief summary of todays report. Click here to read the full report on our main website
If you are buying a property abroad, and want the best exchange rates, just click on the links below to go straight to our main site, or Email Me
GBP Sterling USD Dollar EUR Euro NZD Kiwi AUD Aussie DKK Krona CAD Loonie CHF Swiss ZAR Rand THB Baht HKD Dollar CZK Krona TRY Lira SEK Krona NOK Krona