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Sterling drops after BoE cut growth forecasts

News Date: 4/2/2016 09:25:00
Sterling nursed losses versus most of its rivals after the Bank of England cut its growth forecasts in respond to global trade and financial risks. The bank expects growth to slow down to 2.2% this year and 2.3% next year, down from 2.5% and 2.6% respectively in November. Inflation forecasts were also cut down, with Britain's prices expected to grow less than 1% for the whole of 2016, longer than expected.

Additionally, Ian McCafferty, a voting member of the rate-setting committee, joined his colleagues unexpectedly to vote to keep interest rates unchanged at the record low of 0.50%, after voting to raise it every time since August, making it a nine versus zero decision, and highlighting the extended period it might take for the bank to raise the rates in such an unfavorable environment.

Sterling tumbled to a two-week low against the euro at 0.7699, before scaling a bit back to 0.7670, still down a hefty 0.85% for the day. The pound hit a week low versus the yen at 170.63, down a similar 0.82%. It dipped 0.11% against the dollar to 1.4588.

Oil prices engaged in very volatile trading today, teetering back and forth, with U.S. crude futures trading last at $32.76 a barrel, up half a dollar, or 1.50%. Brent crude futures were more muted, advancing just six cents, or 0.17% to $35.07 a barrel.

European shares jumped at the open, before sliding back on worries over Britain's growth and oil prices volatility. The pan-European index FTSEurofirst 300 slumped to a two-week low at 1,280, down 1.17% on the day. Germany's DAX tumbled 135 points, or 1.43% to 9,298, while France's CAC 40 retreated forty points, or 0.90% to 4,193. Britain's FTSE on the other hand jumped half a percent on the prospect of less monetary tightening in the future, trading last at 5,863.

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