Global Reach Partners Ltd: The Outlook for Sterling Still Looks Uncertain

(PRWeb UK) March 24, 2011

According to Global Reach Partners Ltd, the European Central Bank (ECB) dropped its clearest hint so far that they could increase interest rates by 25 basis points to 1.25 percent in April. Markets reflect the fact that the ECB will increase rates by 125 basis points over the next 12 months; this has been supporting the currency’s performance of late. One issue that may hinder the ECB from proceeding with a rise is the crisis in European sovereign debt; large cracks are reappearing in this area of the market. The US has seen some more upbeat market data in the last few weeks, despite this the FOMC are not contemplating hiking interest rates anytime soon. This in turn has been hindering the Dollar.

The outlook for interest rates in the UK is not so clear cut. In January the illusory economic outlook was shattered when Q4 GDP spooked the markets contracting by 0.5 percent. Chancellor Osborne was no doubt thankful that he had the snow effect to blame in December. The MPC’s dilemma is the battle between inflation and growth. Inflation has registered above its target range for 13 consecutive months and is currently at a rate of 4.0 percent. This is due to the increasing price of oil and commodities, so the ongoing geo-political tension in the Middle East and Africa is the last thing the UK and global economy needs. This leaves the Bank of England stuck between a rock and a hard place. At present the voting members of the Monetary Policy Committee (MPC) are split four ways in what to do next. The cast of the last votes showed that members were split between expanding quantitative easing, keeping rates on hold and raising rates by 25 and 50 basis points. If rates are not increased by the end of May they may not rise for a while, the MPC will then be without their

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