Sterling has enjoyed a modest rally against the US Dollar despite the disappointing UK economic data seen this week.
The Pound Sterling Exchange Rate was in the region of 1.5355 against the US Dollar as of 10:45 am GMT
Although inflation figures, retail sales and employment data have all fanned concerns regarding the pace of UK economic recovery, the Pound gained modestly against the ‘Greenback’ yesterday and climbed a further 0.5 per cent this morning. The British currency also advanced slightly against the Euro.
Yesterday Future Governor of the Bank of England Mark Carney intimated that the UK, Japan and the Eurozone are ‘crisis’ economies.
Carney stated: ‘The US is breaking out of the pack of crisis countries that includes the Euro area, the UK and Japan.’
He then went on to assert that there are limitations to what central banks can do to stimulate growth: ‘Some people may be expecting central banks to do too much. If we want to talk about ultimate sources of growth, sustainable fiscal policy is a necessary condition. Sustainable growth comes from the private sector, not from the IMF, Bank of Canada or anyone else.’
In July Carney takes the reins of the British central bank from current Governor Mervyn King.
His recent comments have lowered the odds of the BOE increasing stimulus when the transition occurs, and as fiscal stimulus commonly weakens currencies the Pound was able to advance in the wake of Carney’s speech.
As foreign exchange expert Neil Jones notes: ‘The Pound is up since Carney spoke. The market was looking for something more on the quantitative easing front. They did not get it.’
Sterling is in line to experience significant volatility next week following the release of first quarter GDP data for the UK, revealing whether the UK sidestepped an unprecedented triple-dip recession.
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