British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency in sharp drop vs EUR, but registers welcome gains vs USD

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Category: British Pound Sterling

Published on Thursday, 26 January 2012 09:51

Written by Sam Coventry

There is a positive tone to market trading this morning, this has resulted in falling demand for the US dollar.

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British Pound Sterling (GBP) in US Dollar (USD): GBPUSD is 0.24% higher on a day to day basis at 1.5694.

British Pound Sterling (GBP) in Euro (EUR): GBPEUR is 0.5% lower at 1.1949.

British Pound Sterling (GBP) in Australian Dollar (AUD): GBPAUD is 0.41% lower at 1.4723.

This morning equity and commodity markets are showing a positive tone, this has reduced demand for the US dollar, and boosted demand for the risk-prone Euro.

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The British pound continues to be driven by underly market risk dynamics.

That said, some focus still rests with the domestic environment.

The January MPC minutes showed a 9-0 vote split for no change in rates and the asset purchase programme.

The minutes acknowledge that the most serious near-term risks have moderated, but the overall tone remains dovish.

Our UK economist notes that there is a group in the MPC now a little less worried about the inflation undershoot.

To that group the 'risks to inflation were more finely balanced and it was less clear that inflation would fall below the target in the medium term'. The committee still believes that major downside risks to the global economy remain and that economic growth in the euro area will stay weak for the foreseeable future.

This leaves the door open for more QE in February.

Q4 GDP was softer than expectations at -0.2% q/q vs consensus of -0.1%. The pound was sold heavily into the data, but with the market positioned short ahead of the numbers, there was minimal negative impact on the release..