The European markets respond to the Bank of England’s bleak forecast for the British economy, cutting its growth forecast as household spending slows more quickly than expected.
The bank said consumers were being squeezed between sluggish income growth and rising inflation and as a consequence trimmed its growth forecast to 1.9% from its previous estimate of 2.0%. There was also a warning that weak retail sales and a sharp fall in new car registrations in April could add further pressure to the British economy.
Sterling fell in the minutes that followed – perhaps on disappointment there wasn’t more members voting for a rate rise after it, as expected, remained at 0.25%. Kristin Forbes again voted against the other seven members – in favour of a rise to 0.5% to keep rising inflation in check. Inflation has picked up to 2.3% on the back of higher oil prices and Sterling’s significant fall since June’s referendum last year making imports to the UK more expensive. GBP/USD has failed again to hit the round-number resistance level of 1.30 after the disappointing UK data and the Bank of England report.
And UK industrial production falls faster than expected, shrinking by 0.5% in March, according to the Office for National Statistics. Plus, Britain’s trade gap widened last month despite the weaker pound. The total trade deficit widened by £2.3bn between February and March 2017 to £4.9bn. And Total UK imports in March jumped by £2.9bn due to an increase in the amount of goods entering the country, many from the EU.
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--- Written by Katie Pilbeam, DailyFX
