Sterling Pound Slumps As Figures Show Slow Economic Growth In Uk
The recent news on exchange rates shows that the sterling pound slumps against the euro in the recent weeks.
The sterling pound slumped from an exchange rate of 1.175 to 1.160 last week following the release of the February Inflation Report by the Bank of England.
This report by the Bank of England showed an increase of the inflation rates and projected that the saving rates will continue to hit low records from the already low levels.
And confirmed figures released by the Purchasing Managers Index (PMI) early this week confirmed that the sterling pound slumps further to a rate of 1.158.
The Purchasing Managers Index measures economic health in the United Kingdom’s manufacturing sector.
Figures released mid this week showed the growth level had slumped from 56.2 in December last year to 54.5 in January this year.
This rate was significantly lower compared to the projected one of around 55.8.
For the past few months, the sterling pound has reacted to the turns and twists of Brexit, but last week and this week’s reactions confirmed that the currency is still trading on the major economic principles and fundamentals. Financial and economic experts say that this is a positive indication.
Despite the slow growth in the United Kingdom, the Purchasing Managers Index also reported that the country is having the strongest business anticipations since May 2016.
One of the major factors that have contributed to this improvement includes the effort by the UK to clarify the Brexit process.
According to Pound Sterling Live, another factor that has contributed to this improvement include the greater political stability, a recovery in oil prices, marketing campaigns, diversification into new markets, low-interest rates, new product launches and new business pipelines.
“With business optimism on the rise for the second month in a row, the business sector has received positive gains contrary to the expectations of the Brexit doomsayers and it is expected to continue to grow in 2017,” David Noble the Group CEO at CIPS told a website that publishes news about currencies.s
“With one eye firmly glued on the inflationary arena, which is likely to turn out a permanent fixture in months to come, the sector will be challenged to continue with its current positive gains,” Mr Noble added.
According to Daniel Vernazza, a senior economist at UniCredit, the United Kingdom’s economic growth will continue to hit low records this year.
“The stronger than anticipated economic growth in the United Kingdom since the Brexit vote has been mainly because of the much stronger than anticipated household consumption growth. However, this won't last for long,” he said.
Vernazza also suggested that the UK’s economic growth will slow down due to the squeeze of household income growth and higher imported inflation.
But in the short-term, the exchange rate between the sterling pounds to euro is expected to be stagnant between 1.15 and 1.18.
When the Bank of England published its report about inflation, the euro was not the only currency the UK’s sterling pound took against. The report also showed that the sterling pound also slumped against the US dollar.