Bank of England minutes boost sterling

Currencies Direct October 21st 2009 - < 1 minute read

Last night Mervyn King made a speech in Edinburgh and did not mention an expansion of Quantitative Easing; this morning the released minutes from the MPC showed a vote of 9-0 to keep rates at 0.5% and QE at GBP175 bln. Therefore recent developments were not enough to justify immediate change to rates or QE and evidence suggests that QE’s effect on asset prices “had been substantial” and of the type planned. Although the MPC indicated that in the November meeting QE will be looked at, this feedback has given the market confidence that no expansion will now be undertaken and hence sterling has rallied…

Feedback from the retail sector and the GDP data on Friday will give further clues to the health of the UK economy and good numbers could push GBP/USD and GBP/EUR higher still.

The USD is still under pressure as Chinese Industrial Production was rumored to come in much better than expected; the theme is a recovering China is the pre-requisite to a recovering global economy.

Key levels now to breach are 1.66 on GBP/USD and still 1.50 on EUR/USD. We have feedback from the US economy later in the form of the Fed beige book.

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