5th November 2010
Good morning. Sterling jumped to a 9 month high against the US Dollar and gained versus the euro yesterday, buoyed by a Bank of England decision to keep rates unchanged and its asset-purchasing programme on hold as we predicted yesterday. Rates at 08:30am are as follows:
Bank of England decision
The Bank of England has held UK interest rates at a record low and decided not to pump more money into the economy via quantitative easing (QE). The decision to make no change to policy comes after recent figures on the economy showed good growth.
Gross domestic product (GDP) grew at 0.8% in the third quarter - better than expected - and recent manufacturing data was also upbeat. Until these reports some experts had expected there would be more QE. As there was none, the pound gained against other currencies throughout the day.
Pound vs US Dollar
In contrast the US earlier in the weak decided to pump $600bn into the economy, and the result was a very weak US Dollar. Combined with the UK decision yesterday, rates for Sterling to US Dollar are at their highest for 9 months. If you need to buy USD, contact us today to see how our rates compare with your bank.
Pound vs Euro
Rates remain around €1.14 which is much better than the €1.11 we saw a few weeks ago. The rate is at this level due to the BoE decision and also better EU data that has strengthened the Euro. We expect rates for GBP/EUR to remain volatile however, as any further poor UK data will likely push the pound lower.
A second round of quantitative easing in the new year remains a possibility if the UK economy falters as the government implements sharp cuts in public spending in an attempt to reduce high levels of debt. The BoE are very uncertain about where to go next, and this uncertainty is likely to weigh on the pound in the coming weeks and months.
The UK and EU release more inflation data, so expect GBP/EUR to be choppy today. Retail Sales are also released from the EU along with German Factory orders. US unemployment and Non-Farm payrolls are the main release today however, and we expect volatility in GBP/USD.
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Labels: BoE, Sterling Gains