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Sterling jumped over 1.5 per cent against both the USD and EUR amongst other currencies as the minutes of October’s Bank of England meeting struck a more dovish tone than the market had expected.
While the predictions of a unanimous vote for a hold on interest rates plus a similar 9-0 result on the non-expansion of QE were correct, the major difference came in the text, or, more pertinently, the lack of it.
In September’s minutes Mervyn King had voiced the need for additional easing; there was no such statement in this month’s. Not a peep. Not a sausage.
The market has taken this as a decreased likelihood that the MPC will increase asset purchases by more in November. The contrarian view is that the Governor knew that was little support for an expansion before November’s inflation report and as such no point in voicing a need in October.
So will they or won’t they? I am leaning more to the ‘yes’ at the moment but will reserve a strict ‘yes/no’ answer for the day of the inflation report. I do however believe that sterling is trading at artificially high levels against the euro at the moment and that, particularly with GDP (Friday) on the horizon those of you who are reading this who buy euros should buy sooner rather than later.
The European single currency pushed to a 14 month record against the USD as it broke the $1.50 level. The dollar has been shrinking as signs that the global recovery is still on track and was the worst performing of the G10 currencies yesterday.
Yesterday saw the publication of the Fed’s Beige Book. The survey indicated that the economy, while still gaining momentum, has yet to overcome weaknesses in banking and employment areas.
Data from the UK includes Retail Sales and a Bank of England ‘Trends in Lending’ survey alongside US Initial Jobless Claims and House Prices.
Latest Exchange Rates At Time Of Writing
| Indicative Rates | Sell | Buy |
| GBP/EUR | 1.1062 | 1.109 |
| GBP/USD | 1.6588 | 1.6612 |
| EUR/USD | 1.4976 | 1.4997 |
| GBP/JPY | 151.55 | 152.06 |
| GBP/AUD | 1.768 | 1.7976 |
| GBP/NZD | 2.1956 | 2.2 |
| GBP/CAD | 1.7363 | 1.74 |
| NZD/USD | 0.7541 | 0.7561 |
| GBP/ZAR | 12.36 | 12.42 |
| USD/ZAR | 7.45 | 7.49 |
| GBP/PLN | 4.6193 | 4.6518 |
| EUR/JPY | 136.79 | 137.23 |
