UK pound is heading lower today in Forex trading against the US dollar on all the concerns about what’s next for the British economy. Right now, it appears that stagflation might be the name of the game.
For the last couple of years, the Bank of England has been trying to stimulate economic growth, while at the same time keeping inflation in check. It’s a tightrope walk, and it doesn’t seem to have been working very well. The latest numbers show that consumer prices rose 5.2 percent from a year earlier in September, up from 4.5 percent in August.
Unfortunately, that inflation hasn’t been a side effect of economic growth. Instead, economic growth continues to remain mostly disappointing. As a result, there is a very real fear that stagflation could be setting in. This situation of inflation without economic growth is considered quite detrimental, and the fear of stagflation is one of the reasons that the UK pound is struggling so much today.
The pound is also being pressured by what’s happening in the eurozone, as concerns about slowing Chinese growth and a possible downgrade to France, on top of sovereign debt troubles, depress risk appetite. (This is why the pound is higher against the euro, though.)
At 14:03 GMT GBP/USD is lower at 1.5662, down from the open at 1.5744. EUR/GBP is lower, down to 0.8717, from 0.8724. GBP/CAD is also down to 1.6028 from 1.6113.
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