The British currency is having another dark week losing versus its main rivals and also most of currencies traded in foreign-exchange markets as speculations that the national central bank may extend its asset-purchase program to revive the nation’s economy decreased appeal for the pound.
After a report posted today showing that inflation in the U.K. dropped to the lowest level in 5 years, speculations rose that the Bank of England will eventually have to expand its asset-purchase program, since extremely low inflation levels or deflation are a typical aspect of a recession, economic condition which has been punishing Great Britain since last year when the credit crunch struck the world. The Bank of England had affirmed previously that the current stimulus program would not be brought further, but investors are suspicious since economic conditions in the British Isles continue to deteriorate, and measures are to be expected from policy makers in order to revive the nation’s economy.
The sentiment towards the British currency is extremely negative, since other opportunities are more attractive for the moment in currency markets according to JR Crooks, Director of Research in Black Swan Capital:
Basically, low yields for the foreseeable future, plus greater potential for growth in other parts of the world are a bad combo for the pound.
The forecast in the short-term for the pound is likely to remain negative, unless appeal for the U.K.’s currency rises due to a shift in domestic or international financial scenario.
EUR/GBP touched 0.9404 as of 11:42 GMT from a previous rate of 0.9331 yesterday. GBP/USD traded near neutrality at 1.5801.
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