British Pound Sterling | Currency News Views and Outlook
British Pound Sterling: UK currency still struggling as BoE hangover persists, meanwhile outlook for EUR remains precarious
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- Category: British Pound Sterling
- Published on Thursday, 17 May 2012 08:52
- Written by Will Peters
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The pound sterling (Currency:GBP) is softer on global currency markets this morning, as the hangover from yesterday's Bank of England inflation report persists.
The pound euro exchange rate is 0.13 pct down on yesterday's close at 1.2496. The pound dollar exchange rate is 0.07 pct lower at 1.5900.
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The pound Australian dollar exchange rate is 0.3% lower at 1.5997.
"EUR-GBP continues to track higher on the back of the dovish BoE’s Inflation Report and Governor King’s comments. While the BoE’s central forecast for inflation was revised up in the short run as expected, the real surprise came in the form of the downward revision on the crucial 2/3-year horizon," says Gareth Berry at UBS. 
What currency markets sat up and took note of was the observation that inflation was projected to undershoot the 2% target, this "signifies the readiness of the BoE to expand QE further, particularly if the Eurozone crisis and bank funding pressures intensify," says Berry.
The outlook for the euro remains as precarious as ever though.
The world's press has picked up on yesterday’s reports that the ECB has reduced its lending to Greek banks pending recapitalisation.
Unnamed sources claimed that four Greek banks might be operating with negative equity capital, prompting the ECB to freeze lending to such institutions and so requiring the banks to turn to the Bank of Greece for Emergency Liquidity Assistance (ELA).
The ECB later confirmed that some Greek banks have indeed been moved to ELA from the main operations, but that the recapitalisation would be finalised “soon” – allowing troubled institutions to return to normal ECB funding channels.
