Pound Dollar GBP USD Exchange Rate Could Drop if UK Growth Forecast is Downgraded, as Expected

29 Nov 2011 at 9 AM - Written by Tim Boyer

STORY LINK Pound Dollar GBP USD Exchange Rate Could Drop if UK Growth Forecast is Downgraded, as Expected

The Pound Euro exchange rate (GBP EUR) is 1.1668. The Pound Dollar exchange rate (GBP USD) is 1.5552. The Pound Australian Dollar exchange rate (GBP AUD) is 1.5627.

Today marks a make or break day for the Pound, as Chancellor of the Exchequer George Osborne issues his Autumn statement.

The measures to be announced by Osborne later today have been widely leaked in the British press over the past 48hrs. They will include the announcement of an expansionary policy aimed at boosting growth in the ailing UK economy. The policy will see private pension funds being encouraged to invest £30bn over the next ten years into the British infrastructure. Cynics have pointed out that the scheme is aspirational at this stage, as there are currently no funds in the pot to make it happen.

Other projects to be announced today include a scheme to make funding available for youth employment initiatives, a £40bn pot which will be used to encourage retail banks to make much-needed funding available to British businesses and another scheme which will make nursery places available to two-year olds from the most needy families.

Some analysts have suggested that the plethora of initiatives which the chancellor is set to announce later today, are simply a smokescreen to hide the desperately worrying GDP growth projections for the UK economy from the Office for Budget Responsibility, which he is also set to unveil during his statement. One policy-maker who has seen the projections is reported to have described them as ‘shocking’. If this turns out to be the case, then today may prove to be a very difficult day for the Pound.

Elsewhere, global stock markets have rallied strongly since this week’s open, seeing the benchmark S&P 500 gain 2.92% during yesterday’s session. The increase in global appetite was largely caused by comments from European Commission President Jose Manuel Barroso, stating that the Eurozone is moving towards closer fiscal unity in a united response to the region’s current debt crisis.

However, if the Eurozone Finance Ministers’ meeting which begins in Brussels today, fails to deliver an announcement on an increase in the size of the European Financial Stability Facility, then appetite for risk could be off the menu once again.


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