Sterling falls due to lowered economic growth estimate

Published: 24 March, 2011

Sterling fell by 0.8% against the US dollar as Chancellor George Osborne lowered the estimate for UK economic growth to 1.7% this year from a previous forecast of 2.1%.

Currency rates

EURO/GBP - 1.1520

US$/GBP - 1.6214
CHF/GBP - 1.4784
CAN$/GBP - 1.5901
AUS$/GBP - 1.6005
ZAR/GBP - 11.2410
JPY/GBP - 131.09
HKD/GBP - 12.639

NZD/GBP - 2.1703

SEK/GBP - 10.2766
US$/EURO - 1.4071

Inflation is also expected to remain between 4% and 5% which raises the possibility that we could be looking at a period of "stagflation". Heading into yesterday, Sterling had been buoyed by higher than expected inflation and an anticipation of earlier than expected interest rates. However, the Bank of England minutes showed no changes to last month's voting and the Budget delivered a downgraded growth forecast - both of which contributed to sterling's drop.

In the euro zone, the euro held firm as expectations for an interest rate hike next month rebounded and this contrasted sharply with the Bank of England's stance and also poor US data. The euro's gains were limited by concerns over Portugal, where there were worries that a political crisis could see the country seeking emergency help from the European Union. The European Summit kicks off today, so keep an eye out for any news that could see significant movements.

In the USA, housing figures disappointed yet again with new home sales data undershooting the estimate by 40,000 and hit a record low for February. Crude oil was trading at $116 a barrel as tensions in the Middle East and North Africa kept investors cautious.

Elsewhere, the New Zealand dollar performed well overnight as 4^th quarter growth beat forecasts and helped calm concerns over the onset of a recession.

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