The pound has dropped to a new four month low against the dollar after investors feared a new round of quantitative easing is being planned.
Despite the latest unemployment figures out of the UK showing that the number of people without a job fell by 45,000 during the first quarter of 2012 and the countries total figure falling to 2.625m, putting the jobless rate at 8.2% the bank of England was in a cautionary mood.
However the continuing uncertainty in Greece is threatening the recovery of not just the UK but the whole of Europe. The governor of the Bank of England Sir Mervyn King has warned that a Greek withdrawal could have a significant negative impact on the UK’s recovery. As a result of the continuing uncertainty the BoE has cut its growth forecasts for 2012 from 1.2% to 0.8% saying that the economy will not recover fully until 2014. It also expects inflation to stay above its target of 2%.
King warned ominously; “We are navigating through turbulent waters, with the risk of a storm heading our way from the Continent,” he said.
“We don’t know when the storm clouds will move away. But there are good reasons to believe that growth will recover and inflation will fall back. Along the way we will no doubt be buffeted by winds from unexpected quarters.”
Kings tone has caused some in the financial world to believe that the BoE is planning to pump more cash into the UK’s economy in a bid to stave off any negative impacts from the continent.
The improvement to the job figures is a boost for the UK and adds to a continuingly growing sense of optimism that its recession will be relatively short-lived. The country has seen an improvement in production and retail sales over the past few months.
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