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QE expectations 'weighing on the pound'

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British companies that are arranging cheap international money transfers have been advised the pound's performance is likely to remain muted in the near future.

According to currency exchange specialist HiFX, a large number of economists believe the Bank of England (BoE) will soon announce a further round of quantitative easing.

Andy Scott, foreign exchange dealer at the group, said this is "weighing on the pound", which means it is losing out against various other currencies around the world.

"Sterling has begun 2012 suffering some heavy selling across a range of currencies, especially against the US dollar," he commented.

Mr Scott said this has taken it to "multi-month lows" in the run-up to the next meeting of the BoE's Monetary Policy Committee (MPC).

However, he stressed economists do not believe members of the MPC will announce additional quantitative easing during January's session, while interest rates are also expected to remain on hold.

Mr Scott added that the outlook for the sterling against most currencies does not look particularly favourable. Nevertheless, he said the pound could still perform well against the euro, the Polish zloty and the koruna in the Czech Republic.

This, he said, is because these markets still face the "possibility of recession and further rate cuts could benefit sterling".

According to forecasts from the British Chambers of Commerce (BCC), the financial climate will remain challenging for the UK throughout the first quarter of 2012, despite positive growth in the economy during the final three months of 2011.

The BoE has therefore been urged to stick to an "expansionary" monetary policy and consider adding another £50 billion to its quantitative easing programme.

David Kern, chief economist at the BCC, said this would help to "limit adverse effects on domestic demand" and "keep the sterling exchange rate competitive".

He stated that this could be particularly beneficial to businesses that are exporting goods overseas.

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