British Pound Sterling | Currency News Views and Outlook
British pound sterling: UK currency takes a hit vs US dollar as inflation data affords Bank of England space to expand money supply
- Category: British Pound Sterling
- Published on Tuesday, 22 May 2012 09:28
- Written by Will Peters
The pound sterling (Currency:GBP) is finding the going tough on international FX markets following the release of the latest set of UK inflation figures.
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The pound euro exchange rate is unchanged on Monday's close at 1.2356. The pound to US dollar exchange rate is however 0.37 pct down at 1.5778.
The pound to Australian dollar rate is 0.15 pct down at 1.5942.
It was revealed this morning that the CPI rate of inflation fell to 3 per cent in April, the lowest level since February 2010.
At 3 pct inflation is now within one percentage point of the Bank of England's 2 pct goal.
This will lend support to further quantitative easing (increased money supply = weaker sterling) at the Bank who are said to be considering the move in response to the poorly state of the UK economy.
Indeed, one MPC member, Adam Posen, has said he is less optimistic about the UK economy than he was in April.
"It is interesting that these QE noises are being made right now - this could suggest heightened risk of an emergency policy decision, or a coordinated policy response by central banks to any potential escalation of Greece jitters," says Gareth Berry at UBS.
Looking at the broader currency market picture, "the data calendar is heavier today and should cause some choppy trading throughout the day. Yet, this is unlikely to overshadow EU debate as the main drivers of currency majors now," say UniCredit.