BoE Predicts Sterling to Depreciate as Economic Outlook Worsens
The BoE Quarterly Bulletin predicts worsening of the global economic outlook and reported that "market contacts generally thought sterling was more likely to depreciate further than appreciate". The report, released today, stated that the commercial property market, a sector that has been hard hit by the credit crunch and economic slowdown, was likely to see continued price falls and that the sector would only stabilize by mid-2010. In regards to market funding needs, the BoE noted that "funding markets for financial institutions remained under pressure" and that many money market participants reported "difficulties in obtaining unsecured funding at term maturities". The quarterly bulletin was obviously compiled before last week's financial market turmoil and naturally these difficulties have only intensified since, adding to the gloomy outlook for the U.K. economy.
Despite the recent turmoil in the financial markets, the U.S. dollar continued to weaken against most of the major currencies, with the pound-dollar (GBPUSD) holding above 1.8450.
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