Currency news - UK rate cut delayed

UK rate cut delayed - 05-10-07

The Bank of England decision to hold interest rates steady will provide some near-term Sterling support, but there will be expectations of a interest rate cut within the next few meetings.

Sterling drifted weaker ahead of Thursday's Bank of England interest rate decision with speculation that rates could be cut, although the UK currency found support below 2.03 against the dollar.

In the event, the bank left rates at 5.75% and did not issue a statement with the decision. The breakdown of the vote and any policy splits will also not be known until the minutes are released in two weeks time. The positive Sterling impact will be offset by expectations that there will be a cut within the next few months and the UK currency drifted lower in early Europe on Monday.

The UK housing trends will continue to be monitored very closely as the sector still poses very important downside risks to the economy as a whole. The UK currency has also been undermined to some extent by reports that the government will downgrade growth forecasts.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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