Pound Suffers as British Economy Struggles to Rebound

The British pound was one of the worst performing currencies today in foreign-exchange markets as its monthly budget deficit for January decreased appeal for assets in the country and fueled speculations that economic stimulus will be need for a longer period to help the kingdom’s economy to grow.

After posting its first budget deficit for January since 1993 this week, the pound declined versus most of the 16 main traded currencies as it signaled that public accounts may be in a position difficult to adjust, evidencing that economic conditions in the U.K. are worse than in multiple economic regions in the world, specially if compared with its key-trading partners U.S. and China. Speculations that Bank of England officials are considering further stimulus or continuing the currently suspended asset-purchase program also impacted the outlook for the pound, as it can be understood that the economic growth in the U.K. for this year may be below optimistic forecasts.

The U.K. has not yet managed to put itself back on the tracks of growth as the credit bubble which struck the country in late 2008 was deeper in Britain than in the Eurozone or Asia for example. As long as positive and solid economic data is not published in the country, the sterling will remain among the least attractive currencies among the most important ones in forex markets.

GBP/USD traded at 1.5567 as of 17:10 GMT from a previous intraday rate of 1.5673.

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