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Sterling suffers setbacks as UK cuts growth forecasts

Sterling suffered a setback as the Bank of England cut its growth forecasts and noted that events in the Euro zone increased risk of the UK economic recovery faltering.

Currency rates - May 17

EURO/GBP - 1.2491

US$/GBP - 1.5902

CHF/GBP - 1.5006

CAN$/GBP - 1.6087

AUS$/GBP - 1.5990

ZAR/GBP - 13.161

JPY/GBP - 127.75

HKD/GBP - 12.3548

NZD/GBP - 2.0748

SEK/GBP - 11.361

AED/GBP - 5.8402

US$/EURO - 1.2722

INR/GBP - 86.53

This is due to events in the southern states of the euro zone and the UK's dependency on the Euro zone as a trading partner. This has raised the spectre of further quantitative easing in the UK which is negative for sterling. One piece of good news was that unemployment had fallen.

The euro is still under pressure. Although it gained ground against sterling it continued to lose ground against the US$ dipping below US$1.27/€1 at one stage. The problems in Greece continue with another general election having to be called. It also appears that the European Central Bank is limiting the funds being made available to certain Greek banks from The European Stability Fund which is increasing tension.

US industrial production increased 1.1% in April, the strongest months growth since December 2010. Hopefully this positive data will feed through to the employment figures especially as it is expected to continue. Housing starts also increased on an annualised basis by 2.6% which is another positive. So in comparison to the UK and Europe the US economy is moving forward which together with the US$'s safe haven status is supportive of the US$.

Elsewhere the commodity backed currencies have enjoyed a brief respite against sterling gaining ground on the back of possible further quantitative easing in the UK.

http://www.youtube.com/watch?v=at1_TQv4EBI&feature=youtu.be