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Pound on a nosedive

Currencies Direct February 21st 2013 - < 1 minute read

The Bank of England monetary
committee minutes released yesterday compounded the misery for the
pound.  The pound has lost further ground against the USD and
the Euro yesterday as the market digested a bank more than willing
to tolerate higher inflation and consider other types of asset
purchases.  The vote on QE was also very divided with a 6-3
vote with governor Mervyn King being outvoted for only the fourth
time in his long tenure.  The misery continues and if anything
is gathering momentum for the pound which has fallen off a cliff
and is still falling.

The FOMC minutes were also released
yesterday and confirmed that policymakers disagree on the path for
the open ended QE programme.  There is a general concern among
FOMC members about the dangers of a growing balance sheet and the
risks associated with further asset purchases.  Essentially
the tone from some in the FOMC is to slow the pace of asset
purchases and this has led to USD strength and a downturn in risk
sentiment. 

The focus for today will be on
Eurozone PMI data and overall an improvement is anticipated. 
In addition we have US inflation data, US existing home sales and
the Philly Fed manufacturing index.  However in the FX markets
attention will remain on the digestion of central bank sentiment
and this should see more pressure on the pound today and USD
strength.

Written by
Currencies Direct

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