Sterling continues to be friendless. The Bank of England kept UK interest rates on hold. The BOE have a very difficult balancing act. The economy is suffering but inflation is on the up. We have seen sterling lose 10% plus against the Euro in a very short period in time. This will help make our exports more competitive. However, at the same time it makes our imports more expensive thereby increasing inflationary pressures, especially as we have a balance of payments deficit. Retail figures have been mixed. M&S had a poor Christmas whereas Sainsbury and John Lewis seemed to do well. Also the credit crunch continues to be a problem with banks still wary in lending to each other. So overall not a happy situation which will take a while to work through. So we wait to see where the bottom is for sterling.
The € is all conquering given the sorry state of sterling, currently sitting at €1.320/£1 inter bank, and the US$. The European Central Bank kept interest rates on hold and have made it clear that they will not be reducing interest rates any time soon as inflation is their major concern. It is thought very unlikely the ECB will increase interest rates given the parlous state of western economies. Euro land exports must be suffering but as yet this does not seem to be a major factor in the ECB's thinking.
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