By TraderVox.com
Tradervox (Dublin) – A report from the Office for National Statistics showed that the UK economy shrunk more than it had been expected in the last quarter forcing the sterling pound to decrease against the euro to five month’s low. This has been construed to mean that the government will now be considering more seriously about another round of asset purchases to accelerate growth in the country.
The sterling pound fell against the euro and the dollar for the second day paring its gains since the start of the year. The statement also showed that the household disposable income also decreased over the last quarter indicating that the UK economy is struggling to recover from the aftershocks of the Euro crisis. The country is on the risk of losing its AAA credit and investment rating from Fitch and Moody’s respectively.
According to Mervy King, the Bank of England Governor, the economy might be in need of another quantitative easing operation in order to jump start economic recovery in the country. The BOE Governor indicated that he has an open mind about the prospect of another asset purchases program. Some analysts have talked about the disappointing report saying that this has put the sterling pound on the “back burner.”
The sterling pound weakened by 0.6 percent to trade at 83.95 pence per euro, this is registered as the biggest drop since February 22. The pound then dropped further to trade at 83.88 pence per euro which was 0.5 percent during the London session. The sterling pound also dropped against the dollar by 0.7 percent to trade at $1.5847; the pound had increased by 2.1 percent against the dollar over the last three months.
The Office for National Statistics indicated that the Gross Domestic Product (GDP) dropped by 0.3 percent in the last quarter which higher than what analysts were expecting, which was a 0.2 percent decline. This now marks a second successive decline in the UK economy putting more pressure on the BOE to take strong measures to put the economy back on track.
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