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Analysts optimistic about sterling's prospects

Analysts optimistic about sterling's prospects

Companies in the UK that are planning a business money transfer to a euro zone country have been advised the British currency is likely to perform relatively well in the near future.

According to a survey of foreign exchange strategists by Reuters, the outlook for the single European currency is uncertain, due to the continuing debt crisis in the eurozone.

However, analysts noted that improving conditions in various industries in the UK over the last few months bodes well for the performance of the Sterling during 2012, as does the Bank of England's ongoing commitment to quantitative easing.

Businesses may want to arrange a currency comparison before moving any funds between Britain and the eurozone.

Bilal Hafeez, a spokesman for Deutsche Bank, commented: "The BoE delivered QE2 on cue, but the market did not deliver on pound weakness.

"It is euro travels that have allowed EUR/GBP to drift more comfortably."

James Knightley, an ING economist, added: "The manufacturing, services, and construction PMIs have all surprised on the upside and offer some hope that there is still life in the UK economy."

Optimism regarding the UK economy was recently boosted when the Office for National Statistics revised its estimate of GDP growth in the third quarter of 2011 to 0.6 per cent – up from 0.5 per cent originally.

The British Chambers of Commerce (BCC) described this as a "pleasant surprise" and said the country performed better than the eurozone did in the same period.

However, the organisation warned that the annual growth rate of 0.5 per cent is "very weak" and shows that a number of challenges continue to face the economy in the UK.

David Kern, chief economist at the BCC, flagged up limited growth in the manufacturing sector as one ongoing issue that needs to be addressed, along with subdued conditions in the export market.

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