18 May 2010

Sterling Retreats

An interesting morning in the London session, as the pound rose initially after backing down against the US dollar. The reason for the rise and fall was the announcement of April inflation figures.

The ONS revealed that inflation for April rose by 3.7%, higher than had been expected by economists.

For the pound, this means weakness is likely because investors now expect that interest rates will be raised sooner than expected on the back of high consumer prices.

As for the country's large deficit, the new coalition government is set to introduce 6 billion pounds of spending cuts as early as next week.

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