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The pound snapped a three-day rally against the dollar before a report that showed U.K. inflation accelerated in July as energy costs rose, squeezing Britons facing slowing economic growth and government spending cuts. This morning sterling declined against half of its 16 major peers. Consumer price inflation quickened an annual 4.4 percent last month, compared with 4.2 percent in June. Chancellor of the Exchequer George Osborne said last week that the U.K.’s recovery will “take longer and be harder,” while Bank of England Governor Mervyn King signaled a day earlier that he may resume pumping cash into the economy to boost growth. With all the above in mind we can not expect sterling to outperform the dollar in the coming weeks.
GBP/EUR: Euro declines against sterling on poor economic data from Germany
Stagnant growth in Europe's powerhouse Germany knocked stocks lower this morning and hit the euro, adding to investor fears that the world economy is slowing more than expected. The focus today is also on the meeting in Paris between French President Nicolas Sarkozy and German Chancellor Angela Merkel, with investors looking for any signs of new measures to contain the spreading euro zone debt crisis. The markets are watching closely for a particular result from that meeting and Euro may go sharply in any direction depending on the outcome.