The Pound has weakened today against the majors on the back of the Bank of England’s bleak inflation report. Sterling has fallen from daily highs of 1.173 against the Euro, to lows of 1.164, consolidating at around 1.166.
The BoE’s quarterly inflation report suggests that we are currently experiencing the peak of an inflation wave that is on the verge of crashing down; bringing the economy with it. At the start of 2012 VAT contributions: energy prices: and import prices are all set to decline, and although this sounds like good news for the individual; it signals negative growth for the GBP.
Mervyn King, chairman of the BoE, stated that the problems of the Eurozone have directly affected the economic growth outlook for the UK; global demand has deteriorated, debt crisis fears have drained the banking sector and financial markets and business confidence has decreased.
Negative figures were also released today from the National Statistics; unemployment grew more than expected from 8.1% to 8.3%, that’s 262 million people without jobs, the most in 15 years. The Claimant Count Rate fell from 5.1% to 5.0%, with 15,000 less benefit claims in October than was expected, but these little glimpses of hope are overshadowed by the vast financial debt crisis.
In the face of adversity, the European Monetary Union announced a growth of 3.0% in the Consumer Price Index. This shows a positive increment for the Eurozone as the price of goods and services increases.
The Bank of England’s announcement only made clear what analysts had predicted: that the UK is heading into rough waters in terms of the economy. The assertion of Italy’s Mario Monti that he will lead government as Prime Minister with the backing of congress, may improve investors trust in Italy and its ability to beat the debt crisis. A small step for forward for Italy and a considerable projected step back for the UK has caused the Pound to falter on its rally against the Euro.
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