Sterling is under sharp pressure on Monday after a BOE Board member warned of a possible slide in GDP.
In an interview with Western Morning News over the weekend, Bank of England Monetary Policy Board Member, Kate Barker said UK economic growth may contract once more, but will likely not fall back into recession. She explained that bad weather and an increase in the VAT are likely to hurt some of the increases in retail sales in the UK.
The comments were sour enough to overshadow some upbeat talk from a Moody’s analyst earlier this morning. In an interview with Reuters, Moody’s senior VP Kristin Lindow said that a hung parliament in the UK would likely take debt reduction measures, leaving the UK’s AAA rating intact, and that the UK remains a long way off from a change in outlook.
Indeed, much of the recent weakness in the pound has been attributed to the possibility that a minority government in the UK will not be able to achieve the necessary debt-reduction measures needed to maintain a AAA rating.
Nevertheless, focus in FX this morning continued to be on the dire situation in the UK, leaving GBP/USD lower by 146 pips at 1.5058 this morning after the pair traded in a range between 1.5021 and 1.5207 so far today. Short term resistance lies at 1.5575 with support at 1.4873 and 1.4784.
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