Sterling rises slightly, but remains under pressure

Good Morning. Sterling rose yesterday after a slight rise in inflation expectations, though analysts expected economic and political concerns to keep the pound under pressure ahead of an upcoming general election. At 08:30am rates are as follows:
A survey from the Bank of England showed expectations for inflation over the next 12 months rose slightly and showed a modest rise. Sterling rose slightly but this is not overly significant. I don't think it will have any impact on Bank of England policy ahead, and most analysts expect the pound to remain under pressure.

Sterling has fallen 7 percent on a trade-weighted basis from its January highs. Analysts remained jittery the threat of a hung parliament after the election could stymie efforts to deal with the UK's spiralling budget deficit.

Adding to the negative mix was concern over Britain's sovereign ratings after Fitch Ratings highlighted on Tuesday the UK's deteriorating credit profile.

At some point this year the pound is likely to recover, but this may not happen until after the upcoming general election. Recent political uncertainty and the lack of a robust plan to reduce our deficit are cited as contributing factors to the weakness of the pound.

The budget at the end of March may give signals as to how the government plans to cut the deficit. It’s more likely however that after the general election, widely believed to be taking place in May, the UK’s economic position will be much clearer, and a stable government and a robust plan to tackle the deficit will result in a more stable platform for Sterling to recover.

Until then, it’s likely the pound will remain on the back foot and exchange rates are unlikely to stage a significant recovery.

Have a great weekend.

Today's Data
EU – Industrial Production
Can – Unemployment
US – Retail Sales

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