GBP to EUR Exchange Rate Slips As IMF Downgrades Its 2013 UK GDP Forecast

Modified: Tuesday, 16 April 2013 19:29 BST - Written by John Cameron

STORY LINK GBP to EUR Exchange Rate Slips As IMF Downgrades Its 2013 UK GDP Forecast

The ailing UK economy suffered yet another body blow during the middle part of yesterday’s European session when the International Monetary Fund slashed its 2013 GDP Growth forecast from last month’s estimate of 1.0% to 0.7%. The news prompted the Pound to lose ground against the euro, sending the GBP/EUR exchange rate down to as low as 1.1627 during the early stages of yesterday’s North American session.

Sterling also leaked support against the high-yielders on the day, partly thanks to a return of global appetite for risk following Monday’s disappointing Chinese Q1 GDP data and the Boston Marathon bombs. This caused the GBP/AUD exchange rate to edge back down to 1.4749 and the GBP/NZD exchange rate to edge back down to as low as 1.8020 following the pair’s pronounced gains of yesterday.

Losses for Sterling would surely have been of a greater magnitude were it not for the fact that the IMF also downgraded its growth projections for a raft of major global economies and for the world economy as a whole. The world economy is now forecasted to expand by 3.3% this year, versus the IMF’s previous projection of a 3.5% increase in global economic activity in 2013.

Looking ahead to today’s session, the highlights are provided by two major global central banks. The Bank of England leads the way at 0930hrs GMT with the release of the minutes of its April monetary policy meeting. The key element of the notes comes in the form of the nine-man committee’s voting split on Quantitative Easing. In recent meetings, three of the MPC’s members, including the Bank of England Governor Mervyn King, have voted to increase the £375bn allocated to Britain’s QE programme. If the minutes reveal that another member joined these three, then Sterling will leek support. Meanwhile, the Bank of Canada makes its latest policy announcement at 1500hrs GMT. A surprise hike in its key lending rate from its current level of 1.00% would propel the GBP/CAD exchange rate back down into the low-1.50s once more.

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