United Kingdom’s GDP shrank by 0.2 percent in the fourth quarter which prompted the Bank of England Governor Mervyn King to qualify the recovery of the U.K. economy as “slow and uncertain.” King is trying to calm more optimistic views that see England avoiding two consecutive losing quarters as the outlook for the first quarter of 2012 is positive.
The GBP has been boosted by the fallout of the European outlook after the Greek bailout deal was finalized this week. A point of concern is the dramatic drop in business investment as companies are scaling back their spending.
Oil prices have reached an all time high in Europe and the U.K. (EUR 92.75 and GBP 78.53) due to supply concerns and a steady demand. US Dollar weakness has further propped up the price of oil as its the currency of denomination and countries where their local currencies have appreciated will feel a double pain as exports and energy costs both rise.
The G20 meeting that starts tomorrow will focus on the Eurozone crisis and what the role of the group will be going forward. U.S., Chinese and Japanese official have questioned the role of the IMF and wantÃ‚Â more assurances that European individual governments and the economic zone as a whole are doing their part to prevent sovereign debt from reaching default status.
The IMF is looking for a 500 billion dollar commitment from the group in order to face the current European crisis. China, Japan and Mexico are willing to help if Europe leadership acts in line with their rhetoric. The U.S. is not seeking to add additional funds until they see “additional steps” are taken to prevent contagion.