Minutes of the last MPC meeting showed this morning that there was indeed a 3 way split at their last meeting with Posen voting for additional easing, Sentence for raising interest rates and the rest voting for keeping it all unchanged. The minutes have shown that a few of the other members are talking seriously about additional easing but thought the time wasn’t right last month.
The pound initially dropped 50 pips against the Dollar and about the same against the Euro but because the release was in line with expectations the market has already priced this in.
In another area the UK public sector borrowing figure showed that we have borrowed over 2 billion more than expected last month with the majority of this going to service the nation’s debt mountain.
Exchange rates should remain volatile today with the usual currencies benefitting from heightened risk aversion and difficult currency trading conditions.
The currency benefitting the most from all this is the Swiss Franc. The combination of a strong domestic economy and solid economic policy has pushed the Swiss franc higher against most of the majors. The franc’s move was currently mirroring international developments, analysts and traders said.
Sterling hit the day’s low against the euro/dollar/swissy etc along with gilts cutting gains after the minutes raised expectations of more quantitative easing and data showed UK public borrowing rose to a record high for the month of September.
Expect further drops in sterling’s value over the next few months when the easing cycle really kicks in. The Dollar will also continue to weaken if their policy continues to add more dollars into the banking system.