A Mike Paterson Forex update

This morning saw the monthly inflation report from the Bank of England delivered by Governor Mervyn King and it didn't make pleasant reading, which may still be surprising to those with their heads under the duvet, but not regular readers of this column.

The essential points were:

– BOE downgrades growth forecast to 1.4 %, realising that prevailing conditions are weaker than expected

– Inflation could reasonably be expected to rise to 5% by end 2011

– No commitment to holding interest rates at 0.5%

– BOE doesn't rule out further asset purchases

– Monetary policy must have discretion to move as circumstances change

– Global economic weakness needs greater level of global co-operation

None of this was mind-bogglingly new but the consideration of adding further liquidity put the skids under the Pound again and we saw a rapid dip across the board before settling down. GBPUSD has been below 1.6200 and GBPEUR down to 1.1260.

The FTSE has failed on any rally toward 5250 since last night and is currently looking poised to head lower at 5195. Much will depend on the Dow's performance this afternoon.

Sir Merv (in some circles formerly The Swerve due to his fleet of foot in policy decisions and subsequent questioning) has at least been consistent in his view over the past months and does not attempt to paint the prettier picture that Nos 10 & 11 Downing St would have us believe.

Small comfort in these testing and unsettled times but hey, almost reassuring for its lack of political pettiness, even if won't do much for the Pound. But then he's always had a keen eye on making sure we get the currency wooden spoon to help our exporters. Just a shame that we've got more importers.

Ho hum…

Weekly Economic Calendar-HERE

Interbank Rates as of 12:10 BST





















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Mike ‘Oscar’ Paterson has been in the Forex trenches for nearly three decades working as a senior Spot trader in London at UBS, Chief Dealer FX at the State Bank of Victoria and in charge of Spot CHF at Credit Suisse with a daily turnover in excess of $1.5 billion. Mike now works as an independent consultant providing a fully bespoke service to the corporate and private sectors in physical FX delivery as well as guiding those who wish to improve their currency trading. Mike also presents seminars and workshops and writes for a number of publications.
To contact Mike please call +0044 (0) 1732 700383 or email mike.paterson@economicvoice.com
The views expressed above are those of the author and should not be taken as investment advice. MSP Foreign Exchange Services will have no liability for, or to, any persons executing trades based on the content above.

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