BOE Inflation Report Raises Inflation Outlook By 12 Months…

(UK) Bank of England Releases Quarterly Inflation Report which raised inflation forecast with CPI seen above 2% for the next year or so compared to its Feb forecast of until Q4 2012. The report noted that Inflation report chart shows CPI at around 1.6% in 2 years and at 1.8% in 3 years assuming market interest rate path and AFT steady at £325B.


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(UK) BoE Gov King stated during Q&A that contingency plans were being discussed for some time with UK Treasury and FSA regarding the euro area. On QE decision he noted that ultimately have to be driven by inflation outlook, last week decision consistent with that idea.


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This means no more stimuli from BOE for the time being as inflation is a concern. With UK’s GDP showing 2 quarters of negative readings in a row, the outlook for UK is bleak at best, and if you combine the threat of a EU collapse, GBP is likely to weaken further.  I now see a weaker GBP against EUR and a potential EURGBP rebound from the psychological 0.80000 level.

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