The Pound has today given up its recent gains following the Bank of England’s quarterly inflation report and accompanying speech by Mervyn King.
The Bank’s downbeat picture of the economic outlook has sent shockwaves through markets, after a few days of positive data had given the Pound a welcome boost and prompted speculation about the beginning of a recovery for UK plc.
King confirmed that interest rates are likely to remain low (currently 0.5%) for the foreseeable future – and with the Pound particularly sensitive to interest rate movements, the ailing UK currency has fallen back over 2c against the US Dollar and 1c against the Euro in morning trading today.
For anybody who needs to transfer money overseas, the disappointing movement comes after manufacturing and trade balance data earlier in the week came out better than expected, prompting a slow but steady increase in the Pound’s value.
With no other major UK data out this week, analysts will now question whether the Pound can recover at all in the short term. Exchange rates for sending money to the USA may be volatile for the rest of the week however, as a raft of economic data from the States is due over the next 72 hours.