Currency news - Bank of England caution

Bank of England caution - 16-09-08

Although the major UK banks are being bolstered by action earlier this year to boot balance sheets, the UK currency will still tend to struggle while financial-sector risk remains so high. The UK currency was holding around 1.7950 against the dollar in early Europe on Tuesday with domestic political stresses adding to the mood of uncertainty.

UK consumer inflation rose further to 4.7% in August from 4.4% previously while the core rate rose to 2.0% from 1.9%. The RPI rate was slightly lower than expected at 4.8%. The immediate impact of the data should be limited.

In its inflation letter to the Chancellor, the Bank of England was slightly more concerned over the inflation outlook even though it expects the headline rate to peak soon. It stated that the MPC was firmer in its belief that muted growth would be needed to control inflation.

There was no reference to the likely path of interest rates, although the overall tone was slightly stronger than might have been expected. Markets will still be looking for rates to be cut late this year, but expectations of sharp cuts may fade slightly.

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

Full list of daily currency analysis

This analysis report is intended for distribution to ACM Advanced Currency Markets SA private, corporate customers and members. Information contained in this report is based on data obtained from sources considered to be reliable, however, no guarantees be made by ACM Advanced Currency Markets SA as to the accuracy, timeliness and completeness of the data. The opinions and forecasts contained herein are subject to change without notice and ACM Advanced Currency Markets SA accepts no liability for any losses, damages and/or expenses incurred arising from or in any way connected with the utilisation of all or part of this report. This report is meant for information purposes and is not intended to be and should not be construed as an offer or solicitation to buy, sell foreign exchange or indeed any other financial instruments. This report, or any part of it may not be reproduced or distributed without the prior consent of ACM Advanced Currency Markets SA.