Dollar Up Against the Pound as Business Lobby Cuts Growth Forecast for UK

By TraderVox.com

The dollar increased against the sterling pound after the British Chamber of commerce cut its growth forecast for the UK economy. The sterling pound was also weak against the yen after the London based business lobby lowered its growth projection for 2012 from 0.8 percent to 0.6 percent. This has been interpreted as a showing of weakness on the UK’s ability to meet its demands and may even result to dropping from the AAA status.

The forecast for the Bank of England interest rate increase was pushed back to the end of 2013 from the first quarter of 2013. Despite this, UK 10-year gilts were unchanged over period. Investors are keeping a keen eye on the economic factors in UK and any report from the region is expected to significantly affect the performance of the pound against the dollar.

The dollar increased 0.2 percent against the sterling pound to settle at $1.5792. The dollar had increased by 0.8 percent against the dollar on March second. The pound also dropped against the euro by 0.1 percent to settle at 83.46 pence per euro. The pound further declined against the yen by one percent to settle at 128.24 yen.

The dollar increase against the pound has come amidst US stock-index declining trend as China reduces economic growth targets. Investors are also seeking safe haven currencies as they prepare for the Greece’s creditors signing of the debt swap deal. The pound is weakening against major currencies as negative economic reports keeps coming out from the UK. According to some analysts, the euro-zone crisis has influenced the UK exports to the region hence affecting the pound.

According to Neil Jones, the Head of European hedge-Fund Sales at Mizuho Corporate Bank Ltd in London, investors are waiting to see whether there will be any further quantitative easing by the BoE. The speculations about the possibility of further QE has pushed the pound down against major currencies.

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