Wizardry in the UK – 25th January, Vantage FX UK Update
Jay Mawji of Vantage FX takes a look at news around the Eurozone
Jay Mawji of Vantage FX (http://www.vantagefx.co.uk/) takes a look at news around the Eurozone on 25th January 2012 – including new figures showing the UK economy shrank by 0.2% in the last third of 2011.
“Gross Domestic Product figures in the UK showed a remarkable change in the state of the UK economy for the last third of 2011. Figures show the UK economy shrank by 0.2%. This figure was worse than expected by analysts and has sparked political and economic debate around the country. But is it all bad?
In a perfect world, we would like to see the UK economy move forward posting a reasonable but steady level of growth. In 2011 the UK economy grew by 0.9%, which may seem like a low figure but in light of the global economic crisis it is actually quite the opposite. The focus for the UK economy is to return to steady growth. However, growth alone is not a key ‘health indicator’ of the economy. Sir Mervyn King has stated that the Bank of England will look to maintain a ‘laissez faire’ policy, waiting for the economy to take its natural course under their guidance. His first statement was to explain the impact of the European crisis and the rising energy costs on the economy. This, he believed, was forcing up inflation, which was in turn holding back growth. As growth is slow, unemployment is unlikely to decrease particularly as there is large scale unemployment from the public sector. Inflation now shows every sign of returning to below the 2% mark by the end of 2012 or early 2013. The Eurozone is far from certain, however the Euro and European markets seem to be holding up, which will come as much relief. Sir Mervyn King has openly praised previous Quantitative Easing policies and appears to have every intention to continue with this policy to effect growth in the economy. As this growth increases, unemployment should begin to rescind, which should in turn act as a catalyst for further economic growth. What is surprising is that the British Pound has held up fairly well in the midst of further Quantitative Easing projects.
It may seem a little tricky to solve the UK economy, sir Mervyn King however appears to have the little magic potion.”
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