Pound falls on BoE Mintes
Yesterday minutes from this month's BoE policy meeting showed no more policymakers wanted to raise rates, with three out of nine MPC members backing a hike and the rest wanting to hold rates at a record low of 0.5 percent. Markets expected more to vote for a hike, and so the less hawkish results mean it's not likely rates will go up in the next month. This weakened Sterling and exchange rates fell.
The central bank said that there was a "significant risk" inflation could exceed 5 percent in the coming months but that it was too early to tell how strongly the economy was recovering after a surprise contraction at the end of last year.
Growth forecasts cut in Budget
In the Budget yesterday, George Osborne cut the 2011 growth forecast to 1.7% from 2.1%He also said that soaring oil prices meant inflation would remain between 4 and 5 percent this year.
Also, although borrowing projections for 2011-12 were reduced, borrowing over the 2012-15 period is seen at 36 billion pounds more than forecast in November.
"Today's budget has reinforced the fact that austerity is coming... (and) that the UK economy is in for a rough ride over the next few months and years," said Kathleen Brooks, research director at Forex.com
That was the only news in the Budget that had any real effect on exchange rates, after Sterling was already on the back foot after the BoE minutes, and the Pound fell further.
Portugal PM resigns after Budget rejected
Portuguese Prime Minister Jose Socrates has resigned after parliament rejected an austerity budget. The defeat is likely to trigger a bailout similar to the rescue packages Greece and the Republic of Ireland had to accept last year.
If so this could weaken the Euro and push GBP/EUR rates higher, however we'll have to wait and see what happens when EU finance ministers meet to discuss the issue.
EU data today comprises of and EU economic summit, Inflation data for Germany and the EU as a whole. From the USA we have unemployment data. UK Retail sales figures are also released today which show how confident consumers are about the economy.
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Labels: BoE Minutes, EU Debt Crisis, UK Budget