Bank Of England plays down recovery hopes
Mervyn King would appear to have single-handedly caused a significant sell-off in the currency markets this morning with sterling now at a five-month low. Despite the fact that yesterday's Bank of England report gave both positive and negative angles on the UK recovery, today's comments by Mervyn King are certainly as clear as day. So what exactly did the Gov of the Bank of England say to the markets?
In simple terms, Mervyn King has suggested a weaker pound would both help to focus minds upon the unfinished recovery in the UK economy and also attract significant overseas investment. Many people, such as Mervyn King, believe that the UK base for recovery is still fairly fragile and consolidation at lower levels would assist in offering great support in the medium to longer term. However, these particular comments will not be appreciated by the UK government which has been trying to talk up the UK economy for some time.
With UK interest rates unlikely to rise in the short to medium term there will be little support for sterling from that particular angle although in all honesty stock markets and currency markets appear resigned to the fact that base rates are set to remain unchanged for the foreseeable future.
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