Pound’s decline against Euro continues, now for the 3rd straight day. Pound is dropping toward a 15-month low value as Mervyn King, the Bank of England Governor announced that the growth of UK economy is probably going to be weak and there are big challenges ahead for the same right in this New Year.
Mervyn King clearly stated that possible achievements of the policy makers are kind of limited and with this news, the Government bonds also experienced a decline. The 10-year yields actually jumped the most in last 6 weeks, as the Central Bank announced that the inflation is expected to be above the 2% target for the next 2 years, even if the growth stays on the weaker side. Mervyn King also assured that the policy makers will do whatever they feel like being necessary for the betterment of the country’s economy.
The Head of Dealing on the Corporate and Institutional Treasury Desk of Investec Bank, Lee McDarby, stated that investors are currently seeing the gloomy side of the UK economy. Lee added, in case any opportunity was visible, investors went on to sell Pound. There have been a lot of sellers in the market at every point of time in 2013, so far.
Pound has plummeted by 0.7% against Euro and is priced at 86.51 pence per Euro. On 1st February, it actually declined to 87.7 pence marking its weakest level since 31st October, 2012. Against USD, it went down by 0.8% and is at $1.5531 currently. At one point of time in the day, it was at $1.5505 marking the lowest level since 3rd August, 2012. The 10-year gilt yields actually soared up by 10 basis points and are at 2.21% now.
The consumer prices outlook is currently higher than what it was in last November, according to Bank of England officials. They stated that the pound is weaker and the energy bills are increasing as well raising the consumer prices outlook. The asset purchase target has been kept at 375 billion Pounds by the Monetary Policy Committee and the main interest rate has also been kept at 0.5%. Mervyn King, incidentally, is all set to retire by the end of June and this inflation report release was the second last for him. King will be succeeded by Mark Carney, the current Governor of Bank of Canada.