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Sterling has been trading within a 40-point range for most of the morning, as investors continued to digest the policies put forth in the recent UK budget.
The G20 meeting, held over the weekend, set a common goal to halve national deficits in developed countries by 2013, leaving the market feeling somewhat insecure about how those policies will affect global growth. The International Monetary Fund forecast in April that global growth would be 4.25% in 2010 and 2011, but the urgency to cut deficits may eventually lead the IMF to downwardly revise its estimates for global growth, especially in light of the G20’s push for faster deficit reductions. Global fiscal consolidation may, as a result, have a bigger impact on the UK’s growth prospects, perhaps bringing into question last week’s rally in GBP/USD.
