Currency Exchange UK

 

Sterling Slips after Early Gains

Sterling Slips after Early Gains

The pound slipped after initial gains on Tuesday, as concerns arose that monetary tightening could take place as a result of better-than-expected UK inflation data.

This in turn could jeopardise the speed of the economic recovery in the UK, fear investors, as interest rates could be raised sooner than expected.

After having risen 35 points to $1.4522 against the US dollar, the pound slipped 0.3 per cent to $1.4435.  Analysts in the currency market said that initial gains were just a knee-jerk reaction before concerns surfaced.

In April, the country’s inflation rate rose to a 17-month high on the back of tax increases on alcohol and tobacco.

According to the Office of National Statistics (ONS), consumer prices rose by 3.7 per cent (annual rate) in April after having risen by 3.4 per cent in the month before.  It had been forecast that in from March, inflation would rise to just 3.5 per cent.

Meanwhile the new coalition government, the Conservatives and the Liberal Democrats, plan to rush spending cuts of up to £6 billion next week.  This they hope will make a significant start to cutting the largest deficit the country has ever experienced during peacetime.

In addition the new Budget will be announced mid June, says new finance minister George Osborne.  Minister Osborne has already initiated a ‘fiscal watchdog’ to monitor the new government and to ensure that it was doing enough to deal with the deficit.