Improved growth fails to lift pound
The pound has stayed fairly steady.
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Tuesday, 31, Aug 2010 01:46
By Chris Malone
Recent figures showing that the UK's rate of growth now stands at 1.2 per cent has failed to lift the sterling, according to Caxton FX.
The rise from an "already impressive" estimate of 1.1 per cent is good news for the UK economy in terms of recovery, but is likely to be the peak of growth in 2010, the firm said.
It pointed to government budget cuts and forthcoming rises in tax as precursors for a slowdown in economic growth.
Business investment in the three months to June was also down, which Caxton suggested may have offset a rise in gross domestic product.
This, it claimed, has led to the value of the pound staying at €1.22 in spite of the upward revision in growth estimates.
Spokesman Duncan Higgins noted that the UK is edging away from a double-dip recession and that there will probably be growth in the third quarter.
However, he explained that these facts are unlikely to help boost the sterling.
"The 0.1 per cent upward revision is not going to alter any views within the Bank of England," Mr Higgins said.
"Until the impact of the government's spending cuts on the economy is realised, the Bank will remain extremely cautious."
The expert highlighted that governor Mervyn King is unlikely to change his plans to keep monetary policy loose to accommodate the austerity measures.
A recent paper from the Bank's deputy governor Charles Bean looked at the lessons learned from the fiscal downturn.