The Pound declined against the U.S Dollar yesterday, the first slump in nine days, amid signs of persistent weakness in the UK economy and better-than-expected U.S housing data. The UK currency dipped against 13 out of the 16 most actively traded currencies, as the latest UK unemployment data showed that the jobless rate amongst 16-24 year-olds is increasing at the fastest rate since records began in 1992.
Ian Stannard, senior currency strategist at BNP Paribas SA, said "the dollar is really reacting positively to the stronger data out of the U.S." The Pound slumped 1% to 1.5850 by the close of trading last night, while the UK currency was 0.4% lower versus the Euro. Sterling had previously advanced 3.4% against the Dollar over a nine day period, its longest winning streak since the beginning of August.
Earlier this week, the latest inflation data showed that consumer prices accelerated to 3.7% in December, faster than the 3.4% forecast, and the Pound rallied on speculation that the Bank of England will be forced to raise interest rates to combat rising prices. However, with slowing economic growth and rising inflation, the UK economy could be bound for a period of stagflation and officials are likely to refrain from a rate hike until absolutely necessary. ...Read more
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