Pound Remains in Lull
Euro-Pound Exchange Rate Declines
Euro-Pound foreign exchange rates fell further to 79.31 pence per Euro by 8:22 in London today, from 79.21 yesterday. The Pound-Dollar rate yesterday was at $1.8680, from $1.8621.
Last week the Pound lost a total of 3% against the Dollar in the steepest 5 day drop since July 1 2005. This decline has been in response to housing market data showing economic inertia throughout the second quarter and Bloomberg News has also reported retail activity down by 0.2% exacerbating economic hardship for businesses and consumers alike.
Retail sales data is scheduled for release in London at 9:30 am today.
Bank of England in Dilemma
CBI reports this week came in conjunction with the release of minutes from the Bank of England's policy meeting and highlight the dilemma the Bank is facing as ‘stagflation' grips the nation.
CBI reports showed the weakest performance since the aftermath of 9/11/2001 with weak orders, mounting stocks of unsold goods, rising costs and production cuts looming for many. Manufacturers have been forced into raising prices due to severe cost increases in an atmosphere of rising commodity prices and a downturn in consumer spending and confidence. Sluggish conditions throughout European economies have intensified economic pressure, despite the mild relief the weak pound is providing for exporters.
Data from the Council for Mortgage Lenders (CML) showing home loans down 27% in the year to July reinforced the fact that this is a picture viewed by many industries at present.
Faced with the prospect of inflation rising to 5% by the end of the year, seven of nine Bank of England monetary policy committee members voted to leave borrowing costs on hold for the meantime. Presented with the dilemma of whether to slash rates now or hold off until later, the Bank opted to leave rates unchanged with the goal of returning inflation to target levels whilst keeping cuts up their sleeve for a later date.