The pound came under selling pressure yesterday as equity markets tumbled and investors began to brace themselves for the budget due in the UK on Wednesday. Despite the employers’ group, the CBI, coming out and forecasting that there will be economic growth in spring next year, markets were concerned about what may prove to be one of the grimmest budgets in decades. Sterling’s problems were also compounded by the announcement from Bank of America that it had seen a large increase in troubled loans, with the bank setting aside more funds for potential credit losses. Such news is negative for sterling due to the UK’s heavy dependence on the banking sector to drive the economy.
The Consumer and Retail Price indices are released in the UK this morning, giving an indication of inflation at present. Inflation has been cooling of late as commodity prices have fallen in the past year and the economy has been slowing. ZEW also release their economic sentiment survey within Germany this morning. Overnight we have seen Asian equities come under more selling pressure in a possible sign of things to come in Europe and North American trading. A slight boost to the FTSE today may come from Tesco, as they have reported pre-tax profits of £3.13bn, ahead of expectations, and an improvement of 10% on last year.
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