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BoE comments has put sterling under pressure

BoE comments has put sterling under pressure

The UK posted some encouraging data with the economy creating an additional 49,000 jobs in October bringing the ILO(International Labour Organisation) unemployment rate down to 7.8% versus the expected 7.9%. However, the optimism was short lived when the governor of the BoE, Mervyn King gave a damning assessment of future growth prospects for the UK. It is expected that the Britain will grow more slowly than first anticipated and inflation may quicken in the coming months as the eurozone crisis continues to impact the recovery path of the region’s second-largest economy. The combination of low output and above target inflation is forecast until the end of 2014 maintaining the squeeze on household spending. King also commented that the UK could see contraction in Q4 GDP but hinted that high inflation hinders the chance of further QE at this time.

In the euro zone, Germany and France each grew by 0.2 percent in the third quarter but with the euro zone’s debt-laden members suffering deeply, the currency bloc as a whole is likely to have slid into recession.Analysts expect that  the German economy will probably shrink in the fourth quarter given that orders have been falling for the last year and the business climate that caved in. The uncertainty caused in the euro zone will dampen the chances of  German economy to return to decent growth rates until the middle of next year. However, a rebound in the euro zone could be vital for the rest of the world as the United States faces a political battle over its finances and China struggles with the impact of the crisis on their company’s ability to grow and prosper.

On the FX markets, EUR/USD traded higher after five straight losing sessions, benefiting from hopes that Greece will see a resolution to its debt crisis with EUR USD currently  trading at a range of  1.2719 – 1.2773. The downbeat comments from the BoE have put Sterling under pressure against both the USD and EUR. GBPEUR trading at a range of 1.2398 – 1.2453

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