Pound falls after BoE report

As mentioned in yesterdays post the main news for yesterday was the Bank of England quarterly inflation report, and the speech by the BoE governor Mervyn King :





The report was extremely gloomy, and quashed any hope of any early recovery for the UK economy. It would seem the recession is here to stay for the time being, and the news had a very negative effect on the pound.

It showed that the Bank of England expect inflation to drop to 0.5% before recovering to 1% within a few years. It also refused to rule out more extensions to the Quantitative Easing programme, and recovery will be much slower that originally thought.






The forecast here is significantly worse than the governments own forecasts, which as I have said before were very optimistic, and also the only thing the government are holding on to in terms of how the UK will repay the massive debt it is putting us in.

The effect for exchange rates was the pound falling across the board, and dropping well below the recent highs we have seen for the Euro and US Dollar.

We had seen much better than expected UK data early in the week that caused the pound to rally. However due to the gloomy forecasts, and more doubt on how the debt will be repaid, caused investors to flee from the pound and rates plummeted.

Those that took head of this blog and took steps to protect themselves managed to secure some of the best exchange rates all year. Others that simply took a gamble on rates climbing without any protection in case they didnt, now face paying much more for their foreign currency.

If you have requirments for an international transfer, contact us today - click on the banner below, open a free, no obligation account with FCG, and then you are eligable for a free consultation on your particular requirements. We can then discuss your particular requirements and help you get the best possible exchange rates.

Todays data
Today is very light on UK data, although we still may see the pound move in response to yesterdays gloomy economic forecasts. This morning we have the European Central Bank monthly report that contains a detailed analysis of the prevailing economic situation and the risks to price stability. Depending on what this contains, we will likely see volatility in GBPEUR rates today.

This afternoon we have US Jobless Claims and also Producer Price index data. Currently the Sterling to US Dollar rate is still well above $1.50, and if the data is better than expected we could see this drop. If I needed to buy US Dollars, I would consider fixing a rate in advance of this decision rather than gamble and risk rates dropping.

We also have some Retail Sales data for New Zealand, and this often causes movements in GBP to NZD.

Please quote 'Blog' when you call to recieve preferential exchange rates.

Just got a question? Click Here to Send me an Email

Foremost Currency Group