The Pound Sterling Exchange Rate was in the region of 1.1539 against the Euro as of 11:27 am
Is the horse meat scandal the only thing troubling the UK population at the moment? Neigh. The current economic crisis is getting them pretty down as well, and it’s hitting the Pound hard too.
Earlier this week data showed that last month UK inflation held at 2.7 per cent, a figure way above the BoE’s 2 per cent target and one which is sure to have had a dampening effect on consumer spending.
Since that data release analysts have been waiting for the publication of the British central bank’s inflation report, widely expecting that the current economic climate will result in the BoE slashing its growth forecast for the UK.
Consequently, the Pound weakened for a third consecutive day against its European rival this morning prior to the inflation report’s release. Sterling shed 0.3 per cent against the Euro this morning and also declined modestly against the US Dollar.
According to Rob Wood (a chief economist in London), the report ‘is likely to push up the inflation forecast but reiterate that the BOE will basically ignore the overshoots. The BoE will probably lower the growth forecasts, welcome the fall in Sterling and keep the door open to more easing’.
Was he right?
Well, in their inflation report the Bank of England did revise the growth forecast offered in November – but only marginally. The BoE has stated that growth will rise gradually, but quite steadily, achieving an annual rate of roughly 1.9 per cent by the beginning of 2015.
The bank’s inflation forecast for two years time was steeply altered however, jumping from 1.8 per cent to 2.3 per cent. The policy makers are now stating that they don’t expect inflation to drop below the 2 per cent target until the first three months of 2016. This is a year and a half later than predicted just three months ago.
The BoE asserted that Sterling’s recent weakness was largely responsible for higher inflation, as were price rises implemented by the government. It said it was ‘appropriate to look through the temporary, albeit protracted, period of above-target inflation.’
The report stated that UK ‘expansion is expected to be weak by historical standards, mirroring the relatively subdued prospects for both global demand and the supply capacity of the domestic economy.’
The BoE also made it clear that the Monetary Policy Committee hadn’t shut the door on the possibility of more asset purchases: ‘The Committee agreed that is stood ready to provide additional monetary stimulus if warranted by the outlook for growth and inflation’.
Following the news the Pound plummeted by a minimum of 0.5 per cent against all of its main currency rivals, shedding 0.9 per cent against the Euro and 0.6 per cent on the US Dollar.
In a separate report the Confederation of British Industry cut its growth projection for this year from 1.4 per cent to 1, but also predicted that the UK will sidestep a triple-dip recession by posting expansion of 0.3 per cent this quarter. The business lobby group added that it believed fiscal policy would remain unaltered until near the end of next year.
Current GBP Exchange Rates
The Pound Sterling to Euro exchange rate is currently trading at 1.1539
The Pound Sterling to US Dollar exchange rate is currently trading at 1.5563
The Pound Sterling to Australian Dollar exchange rate is currently trading at 1.5065
The Pound Sterling to New Zealand Dollar exchange rate is currently trading at 1.8494
The Pound Sterling to Canadian Dollar exchange rate is currently trading at 1.5615
The Pound Sterling to Emirati Dirham exchange rate is currently trading at 5.7465
The Pound Sterling to Swiss Franc is currently trading at 1.4282
The Pound Sterling to Japanese Yen exchange rate is currently trading at 145.7200
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