Analysts Await BOE Announcements

8 August, 2012

There are fears that the recession in the UK has been deepening over the past month, but not to the extent that many analysts anticipated. One of the key pieces of news yesterday was the revelation that UK manufacturing output fell 2.9 percent in June after a 1.2 percent rise in May. However, this beat forecasts for a 4.1 percent fall. This caused sterling to gain a small amount of value against both the euro and US dollar. Sterling rates are, however, likely to be volatile throughout the day in the run-up to the Bank Of England’s quarterly inflation report, where analysts expect the bank to announce they are to cut growth forecasts from the 0.8% predicted earlier this year to a number close to zero, down from the 2% growth anticipated a year ago. Data also shows that the number of people being placed in jobs in the UK fell for the second straight month in July, although the rates were better than expected. Analysts also point out that it is likely that people are being placed into jobs, but companies are taking longer than usual with recruitment. The Olympics might also be affecting this number.

In the Eurozone, investors hold their breath for the announcement that the European Central Bank may take action to lower borrowing costs for Spain and Italy. This has caused the euro to recover some ground against both sterling and US dollar in the past few days, only to see a slight drop at the better than expected UK data. Adding to the Eurozone problems was the announcement that Italy’s economy shrank 0.7% in the second quarter, a 2.5% slump in growth from last year. Investors are now concerned that Italy may be hit with similar problems that have struck Greece and, more recently, Spain.

Following positive employment data from the US last week, investors now seem to believe that the US economy is on the path to recovery, but without any significant data releases this week, it has slightly lost ground against both sterling and the euro in the face of (comparatively) positive data from both. However, the likely negative news from the Bank Of England later today could cause the rates for exchanging sterling into Euros and others to weaken significantly.

Those of us watching the Olympics yesterday would have been disappointed to see Victoria Pendleton lose her final race to her Australian rival after a debatable decision from the judges. Fans of Team GB shouldn’t feel too bitter towards our Australian cousins however, as Australia itself still has fewer medals than the county of Yorkshire. Still, poor Victoria is probably filled with regret at what happened. If you’re looking to transfer currency in the near future, make sure you don’t feel regret about your exchange rates, and give your account manager at Currency Index a call today.