British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency in rotten start to todays FX trade, GBP/EUR threatens break below 1.19

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Category: British Pound Sterling

Published on Wednesday, 15 February 2012 10:11

Written by Will Peters

The British pound is finding the going tough on the FX markets this morning, the UK currency is looking to cement yesterday's reputation as being one of the worst performing currencies out there.

The British Pound Sterling (GBP) in US Dollar (USD): GBP/USD is 0.02% lower at 1.5688. British Pound Sterling (GBP) in Euro (EUR): GBP/EUR is 0.31% lower at 1.1908, while the British Pound Sterling (GBP) in Australian Dollar (AUD): GBP/AUD is 0.75% lower at 1.4561.

Moody's downgrading the UK's outlook to negative, the country is no longer a member of the 'super-elite' club that enjoys AAA status with a stable outlook.

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"The gilt market was the biggest source of liquidity within this group, and its exit means a 38.9% reduction in such securities. While mandated reallocation may provide short-term upside to CAD, AUD, SEK, SGD and NOK - among the remaining countries in this pool - we do not envisage currency strength purely on a ratings basis," says a morning FX note from UBS.

On the domestic data front, January CPI fell in line with consensus estimates at -0.5% m/m, +3.6% y/y.

"Our UK economist notes that UK inflation is now very solidly in a downtrend. The annual rate will continue to fall through this year, with the CPI expected to touch 2% by year-end," says the FX note.

Ahead, The Bank of England is due to release its quarterly inflation report todayy.

The inflation guidance may give a better understanding of policy direction in the coming months, while markets will also take note of the growth forecasts.

UBS expects the MPC will acknowledge that conditions have improved since the November report, but also that it stands ready to expand the QE programme should the outlook deteriorate again.