UK Growth Forecast Lowered

The International Monetary Fund (IMF) have lowered their growth forecast for the UK and a number of other countries which has led to them predicting global growth falling from 3.5% to 3.3%. The IMF have forecasted UK growth in 2013 to be at 0.7% rather than the 1% previously predicted which is actually slightly more positive than the governments own forecast but still shows that the UK economy is far from booming! At the same time the IMF also downgraded the Eurozone’s growth prospects stating they expect the single currency economy to shrink by 0.3% this year which is clearly worrying news for Europe. Should these predictions be correct, or even close to being correct it could mean that despite a weakening economy the UK and Sterling could have a more positive end to the year against the Euro and move up slightly from the current levels. However, in the short term I still believe that GBP EUR exchange rates all hinges on the GDP figures which are due for release next week. I would also not be surprised to see the IMF amend their forecast again for both the UK and the Eurozone as the year unfolds.

Bank of England Minutes – GBP Exchange Rates

It has been announced this morning that the Bank of England voted 9-0 to keep rates on hold and 6-3 in favour of not increasing Quantitative Easing (QE). This is the same as last month and highlights that the Central Bank are at a bit of a stalemate when it comes to QE with some members wanting to increase the amount of money being pumped into the economy while the others believe we currency have enough. It is certainly a difficult balancing act that they face with more QE likely to push already high inflation up further but could help the UK get out of possible recession. The debate surrounding QE is still tight and I expect it to remain so for the foreseeable future and any change in the banks stance on QE could lead to a big swing in the exchange rates. Should the Bank decide to introduce more QE it could weaken the Pound as the money supply increased while less votes for QE in the coming months could ease concerns that QE will actually happen which may strengthen the Pound.

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