Currency Exchange UK

 

Sterling Falls on Dovish BoE Report

Sterling Falls on Dovish BoE Report

An interesting day so far on the currency market, as the pound offset an initial rally with a decline on the back of a dovish Bank of England report on UK inflation.

According to the Bank’s report, UK inflation will sink below the target 2% rate regardless of whether interest rates remain at their historic low, if the new coalition government does not place additional “fiscal tightening” on the economy.

Against the US dollar, the pound fell and then steadied to $1.4940 by 10:30 AM in the London session.  Earlier in the morning it had risen, aided by a strong euro rally.

Another factor to boost the pound in early trade was the reaction to the announcement of a new government.  

After Gordon Brown handed in his resignation as Prime Minister, the new coalition government between the Conservatives and Liberal Democrats was sealed, with David Cameron taking the keys to 10 Downing Street.

Lib Dem leader Nick Clegg will be Deputy Prime Minister and it is now hoped that the air of uncertainty hanging over Britain will subside.