Sterling got a welcome reprieve from negative sentiment yesterday after BoE minutes revealed that there had been no discussion of cutting interest rates.
- The pound rallied sharply after the minutes of the Bank of England’s September monetary policy committee meeting calmed fears over a possible extension of its quantitative easing programme.
- The minutes showed a unanimous consensus to keep the Bank’s asset purchase plan at current levels and there was no discussion over a cut in the rate its pays on commercial bank deposits.
- The tone of the meeting was more encouraging than had been priced into the market, stating that “ growth in the second half of the year is likely to be positive,” returning demand for the pound.
- However, although the minutes did mention recent improvements in the economic and financial data, they did leave the door open to further policy loosening, which capped sterling’s rally.
- In trading today, the pound has plummeted nearly a cent, hitting a low below the 1.10 mark as decling stocks and another statment from Mervyn King weigh heavily on the pound’s prospects.
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