8th October 2010
Good morning. As we predicted, the pound rose slightly yesterday after the Bank of England decision. The gains were short lived however, and Sterling is down against the Euro again. This morning at 08:30am rates are as follows:
- GBP/EUR 1.1378
- GBP/USD 1.5847
- GBP/AUD 1.6201
- GBP/NZD 2.1165
- GBP/CAD 1.6108
- GBP/CHF 1.5329
- GBP/ZAR 10.943
- GBP/JPY 130.64
- GBP/NOK 9.2162
- GBP/HUF 312.11
- EUR/USD 1.3925
Pound gains after Bank of England decision
The bank left rates on hold as expected, and also decided to hold of more Quantitative Easing, for the moment. Speculation more stimulation would be required is the reason that the pound has fallen so much against the Euro in recent weeks. It's now likely the BoE will look at QE in November, so Sterling will probably remain under pressure. Many suspect the latest BoE decision was a compromise between a three-way policy split. Details of the vote will be released in two weeks' time.
"A three-way split looks to have been the likeliest scenario, with (BoE Monetary Policy Committee member) Andrew Sentance continuing to vote for a hike in the Bank rate, and Adam Posen backing an increase in QE," said Philip Shaw, chief economist at Investec.
The lack of a consensus from the MPC is a concern. If the minutes in 2 weeks show that indeed there was a 3 way split, then it shows that there is no firm agreement on how to go forwards, and this would weaken the pound.
Pound high against the US Dollar
Despite falling against the Euro due to the risk of more QE, against the USD we hit a 2 month high yesterday, pushing through $1.60 before falling back away. The reason rates are up vs USD is the fact the Federal Reserve in the US are also expected to resume Quantitative Easing.
So, the pound and dollar are very weak, while the Euro has regained strength.
UK producer prices are the key release today. It’s a measurement of inflation, and so can heavily impact the value of Sterling. Germany today releases trade balance data, that if very strong may increase the cost of buying Euros.
The US has various earnings data, including Non Farm Payrolls. These are notoriously difficult to forecast, and so can often lead to big swings in GBP/USD. Get in touch to keep informed.
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Labels: Sterlin weakness