Sterling Declines as Interest Rates Remain Unchanged

The Great Britain pound weakened today after the Bank of England kept the interest rates unchanged and Nick Clegg, the Deputy Prime Minister of the United Kingdom, said that Britain’s economic recovery may be “uneven”.

The Bank of England held the key rate at 0.50 percent and performed the quantitative-easing asset purchases at £200 billion ($310 billion). The UK deficit on trade in goods widened to £8.7 billion in July, compared with the deficit of £7.5 billion in June. The exports fell by £0.2 billion but the imports rose by £0.9 billion. The central banks said that the inflation may be below the bank’s target of 2 percent in 2012.

The sterling dropped 3.1 percent the last month versus the US dollar on the outlook that the austerity measures (the government plans the £61 billion cuts in spending) will damp Britain’s economic growth in the second half of this year. For now, the economic reports support this outlook.

GBP/USD recovered somewhat after the drop at the start of today’s Forex session, but later resumed its decline. The currency pair traded at about 1.5445 as of 17:11 GMT today after it opened at 1.5468 and slumped as low as 1.5373. GBP/JPY showed the same trend and traded at 129.47 after opening at 129.43 and falling to the lowest intraday level of 128.56.

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