Currency news - Sterling takes advantage

Sterling takes advantage - 07-09-07

The UK currency will gain some support from stable interest rates and optimism that there will be further moderate growth, especially while unease over US economic trends continues. The longer-term risk profile remains troubling for the UK currency.

Sterling weakened after the Bank of England decision on Thursday with lows below 2.0150 against the dollar, before regaining strength.

The Bank of England left interest rates unchanged at 5.75% following the latest MPC meeting. In a rare statement accompanying unchanged rates, the bank stated that inflation should hold around the 2.0% level over the next few months while it was too early to determine whether the extent of any negative impact on the economy from financial-market stresses.

The bank also stated that there was little spare capacity in the economy. The bank statement weakened Sterling slightly and minutes of the meeting in two weeks time will be important to assess whether there were policy divisions within the MPC. There are likely to be increasing fears over the UK property sector which will curb short-term Sterling support.

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

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