British Pound Sterling

The pound sterling (Currency:GBP) is on the decline against a host of key currencies this morning following news that inflation had receded yet further.

Declining commodity prices have impacted positively on inflation numbers as the Consumer Price Index slowed in May.

The pound euro exchange rate is 0.41 pct lower on Monday's close at 1.2411. (Latest pound euro forecasts are published at our IMT site, access free via this Facebook entry path).


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The pound dollar exchange rate is 0.13 pct lower at 1.5648. The pound Australian dollar rate is 0.24 pct lower at 1.5440.

"At 2.8 pct, inflation is still some way above the Bank of England’s target but this is unlikely to reduce the prospect of further quantitative easing," says Manoj Ladwa at ETX Capital.

Inflation stood at 3 pct in April.
 
Yesterday we reported that both Barclays and Deutsche Bank are now forecasting an additional 50 BN GBP worth of additional easing at the Bank of England to be announced before the year is out.

Expectations are for further falls in coming months.

"Expect further falls in inflation as energy bills rise less over the summer versus last year," said George Buckley at Deutsche Bank.

"The fall in CPI inflation to 2.8% in May increases the likelihood at the margin of more quantitative easing... We expect £50bn with a sizable risk of a 25 basis point rate cut to boot."

Philip Shaw at Investec says: "The inflation measures have all come in below market expectations and another drop in the targeted measure helps the case for more quantitative easing."


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