The British economy required a ‘painful’ adjustment to inflationary pressures and sterling is already feeling the hurt. The Bank of England’s Inflation report was terribly bleak with forecasts of economic contraction for at least the next 6 months and affirmations that the jobs market in the UK is starting to wilt; 60,000 people lost their jobs in the past 3 months. With the growth forecast for the first half of next year being cut to 0.1% from 1.0% and the assertions that inflation will fall sterling lost over 1% against the dollar and euro yesterday. At least 3 interest rate cuts are already being factored in for the first half of 09.

Today we may see a little chink of light against the euro with the highly anticipated German and European GDP releases. Both are expected to post negative readings; if Eurozone GDP is negative it will be the first time it has been since the inception of the euro. US CPI is also due out today with expectations that inflation stateside has fallen over the past month.

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Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.