British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency to remain weak as a weak economy will likely push the hand of the MPC in February

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Category: British Pound Sterling

Published on Monday, 23 January 2012 10:05

Written by Will Peters

Wednesday is the key day for GBP this week, with the Q4 GDP print and MPC minutes both published at 9:30.

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British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is 0.24% lower at 1.5539.

British Pound Sterling (GBP) in Euro (EUR): GBPEUR is 0.2% lower on the day at 1.2019.

British Pound Sterling (GBP) in Australian Dollar (AUD): GBPAUD is 0.38% lower at 1.48.

It's all downhill for the British pound this morning which continues to under-perform on the global currency markets.

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"Wednesday is the key day for GBP this week, with the Q4 GDP print and MPC minutes both published at 9:30. Both publications are likely to show a bleak picture of the UK with zero growth and further leaning towards an imminent extension of QE expected.  Our baseline remains that the MPC will increase the size of asset purchase programme by £75bn at next MPC meeting on 9 Feb," say Barclays Capital.

On Friday, the pound edged higher against the US dollar, buoyed by hopes that Greece and its private bond holders would reach an agreement on voluntary haircuts over the weekend.

The pound was also supported by retail sales growth of 0.6% in December, which was in-line with expectations and far better than the 0.5% contraction we saw in the previous month.

Having ended Friday’s Australian session around the 1.5490 mark, the pound edged higher over the course of European and US trade to eventually close at 1.5581.

Looking at the wider exchange rate markets, two factors are needed to keep risky assets supported: firm global growth, and crisis resolution in Europe.

So far this year, the first of these factors has improved.

Activity data in China remains robust, the good run of data in the US continues and this week our economists expect further signs of stabilisation in the core economies of the euro area. However, progress over Europe has been mixed.

The 3y LTROs have improved sentiment, but plenty of risks remain for which the immediate hurdle is the Greek PSI negotiations.

The news wires from the weekend suggest a deal remains elusive and it is unclear whether an agreement will be in place for approval at this week's ECOFIN meeting.