British pound sterling: UK currency on the slide for second consecutive day against EUR, further monetary easing on the cards

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Published on Thursday, 02 August 2012 09:17

Written by Sam Coventry

International Money Transfers at our sister site

"The latest UK data have magnified expectations for further easing by the BoE, most notably the slide in the UK manufacturing PMI to 45.4 in July" - UBS.

The pound sterling (Currency:GBP) is suffering this morning as investors appear convinced the Bank of England will ease monetary policy today, or alternatively give strong indications of future action.

The pound euro exchange rate is 0.41 pct down on last night's closing rate at 1.2657.

The pound dollar exchange rate is 0.05 pct higher at 1.5543.


The pound Australian dollar exchange rate is 0.38 pct lower at 1.4788.

The focus today will inevitably fall on the Bank of England interest rate announcement at midday and the market expects policy makers to maintain asset purchases at the current level of £375 billion.

There is the chance the central bank will take action and extend bond purchases even further considering the MPC are now armed with second quarter GDP figures that were much worse than expected.

"The latest UK data have magnified expectations for further easing by the BoE, most notably the slide in the UK manufacturing PMI to 45.4 in July, the lowest since May 2009 - not to mention the 2.6% y/y drop in July nationwide house prices, the biggest since August 2009. While our UK economics team expects the BoE to stand pat this week, our base case pegs a 25bp rate cut in November," say UBS in a morning FX note.

Indeed, the weakness in sterling has been concerted:

"The Pound weakened against the Euro for a second day yesterday, falling as low as 1.2630 during the European trading session, while the UK currency struggled to stem the losses versus the majority of the major currencies. Sterling weakened to a low just above 1.48 against the Australian Dollar and has slipped back towards 1.5550 against the U.S Dollar, as the Pound was undermined initially b a weaker-than-expected reading for the Nationwide house-price index of -0.7% for July," says Adam Solomon at TorFX.