Bank of England Lowers U.K. Growth Outlook

The British Pound is down over 1% at themid-session as worries about a slowdown in the economy are forcing investors towonder if the U.K.economic recovery is slowing down.

The British Pound is down over 1% at themid-session as worries about a slowdown in the economy are forcing investors towonder if the U.K.economic recovery is slowing down.

Overnight the Bank of England lowered itsforecast for growth expectations in its quarterly inflation report. The BoEcited declining confidence, tight credit conditions and the government’splanned austerity measures as the main reasons for the reduction in itsoutlook. In May, the central bank forecast about 3.6% growth. The revisednumber is 3%.

Although the U.K. Gross Domestic Productwas more than expected during the second quarter, a key central bank officialindicated that the total growth for the year would most likely average out.

In a statement, BoE Governor Mervyn Kingsaid, “business and consumer sentiment have shown signs of softening, measureof financial fragility remain elevated, and there is great uncertainty aboutthe outlook for both the United States and our most important tradingpartner, the euro area.”

This statement cast on pall on the BritishPound and the Euro, triggering hard sell-offs in both of these markets.

The Sterlingchanged its daily trend to down on Tuesday when it took out its last swingbottom at 1.5819. This morning it is testing a key 50% level at 1.5635.Although an intraday technical bounce is triggering a small short-coveringrally, this level is not likely to hold. The major downside objective is anuptrending Gann angle from the 1.4229 bottom at 1.5429.