The Pound resumed its downward momentum against the Dollar yesterday and also recorded losses versus the Euro after Bank of England policy maker Timothy Besley, who was the sole voice for an increase in UK interest rates last month, said that inflation will retreat by the end of next year.
The Pound has extended its longest losing streak against the Dollar in more than 37-years as Besley’s statement comes in the build up to the release this morning of the minutes from the Bank of England’s last policy meeting.
The Monetary Policy Committee have voted collectively to keep interest rates unchanged at 5.0% but the July minutes showed an element of division that exists within the BoE as David Blanchflower voted to cut and Timothy Besley voted for an increase.
However, his comments in the Sun newspaper yesterday portray a rather different stance and the Pound will come under further pressure tomorrow if the minutes show that Besley withdrew his recommendation for a rate increase in August.
The Pound lost 3.0% in value against the Dollar last week, its biggest five-day loss since the period through July 1st 2005 as deepening slump in the UK property market will exacerbate an economic slowdown as the economy stutters towards a recession.
The Euro registered gains against the both the Pound and the Dollar yesterday as German investor confidence unexpectedly increased by more than initial forecasts in August as the Euro’s decline helped export demand while oil prices retreated over 30% in little over a month.
The ZEW Centre for European Economic Research said its index of investor and analyst expectations rose to minus 55.5 from minus 63.9 in July, which was the lowest level since the survey began in 1991. The report provides some optimism that the 24% fall in oil prices will leave companies and consumers with more money to spend.
Elsewhere, a separate report in Germany showed that producer prices accelerated to 8.9% in July, the fastest pace since October 1981, which reinforces the ECB’S concerns over inflation and provides policy makers with the premise to keep interest rates on hold at a six year high.
The Dollar fell from a six month high verses the Euro and by the close of trading last night the U.S currency had relinquished earlier gains made against the Pound as stocks fell and oil prices rose amid concerns fuel supplies.
The Dollar has gained 7.8% versus the Euro since touching an all time low of $1.6038 on July 15th and many economists have commented that the degree of the move has been too quick to sustain while the recent tone of economic reports has hardly suggested that the economy is through the worst of the credit crunch.
Data Released 20th August
U.K 09:30 PSNCR (July)
U.K 09:30 Bank of England MPC Minutes (6/7 August)
- Agents Report
U.K 11:00 CBI Industrial Trends – Orders (August)
written by Adam Solomon
Related posts:
- The Pound rallies against the majors after BoE policy maker, Timothy Besley, voted for a rise in UK interest rates
- The Pound declines against the majors as the minutes show that MPC policy maker David Blanchflower voted for a 50 basis point cut in April
- The Pound continues to decline against the majoirty of the majors following comments from BoE policy maker David Blanchflower
- The Pound makes significant gains against the majors as UK inflation accelerates to 2.5% year-on-year in August
- The Pound rose against both the Euro and the Dollar yesterday as BoE policy maker Bean warns of persistant inflationary concerns
