Sterling continues to slide against the dollar, could we see more QE in the UK?

Sterling continued its recent decline against the dollar as rates slipped towards $1.5760 on Tuesday, inflation data released early in the day was weaker than expected and will add to speculation that the Bank of England (BoE) could add to their Quantitative Easing (QE) programme to help stimulate the UK economy.

A recent run of poor data from the UK has led to BoE governor Sir Mervyn King and other policymakers to discuss the possibilities of further monetary stimulus to help push growth in the UK. A move which combined with the issues surrounding the Euro-zone has seen the GBP/USD cross fall by nearly 3.5% in three weeks.

Investors would have also taken on board comments made by The International Monetary Fund (IMF) President Christine Lagarde that the economic weakness surrounding the UK means the Monetary Policy Committee (MPC) should consider another round of QE and even cut interest rates from the current level of 0.5%. If the Bank of England opts for further stimulus it will be seen as negative for sterling and we could see the pound lose ground against a basket of currencies.

Sterling’s fortunes were not helped by the Existing Homes Sales data which was released in the U.S. Figures came in stronger than forecast with 200,000 more sales in April than had been predicted. The Existing Home Sales provide an insight to housing market conditions, which is considered to be a sensitive factor to the U.S economy. Today’s data will have been seen as positive news for the greenback and rates reflected this by falling by half a point in the afternoon.

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