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No more QE: The Pound rallies back against the Euro exchange rate

The Pound is rallying back against the Euro today, rising from 1.156 to 1.163 on the back of economic data released this morning. The British Bankers’ Association announced an improvement in mortgage approvals from 33.1K in September to 35.3K in October – 3.3K better than the expected 32.3K.

The Bank of England ‘Minutes’ are released 2 weeks after the interest rate decision and give a full account of policy discussion. They are of particular interest to investors as they document individual votes from members of the committee, which illuminates any contrasting opinions. The report showed that the 9 member committee voted unanimously in favour of maintaining the 0.5% increase rate, and they also remained united in the decision not to increase Quantitative Easing. This is good news for the Pound as increasing speculation had suggested that the BoE were planning to increase QE and thus cause Sterling to devalue. The MPC concluded that the market could not tolerate a new wave of Quantitative Easing; a faster pace of gilt purchases would not help considering the medium-term economic uncertainty.

The European Monetary Union faced a decline of 6.4% on Industrial New Orders in September – 4% worse than the expected 2.4% decrease – signalling negative growth for production values and GDP in the EU. Reports today also showed bearish results for the EU in Purchasing Manager Services Index, and Purchasing Manager Manufacturing Indexes with both figures below the benchmark figure of 50. PMSI is at 47.8, and PMMI is at 46.4 for November.

EU Commission President Maunel Barroso has brought up the idea of creating multi-national ‘Eurobonds,’ the idea is that stronger fiscal unity and anonymity of bonds could allow the more affluent countries to offset the problems of the weaker countries.

As things stand however, the markets have reacted in correspondence to the economic stimuli today; yesterday’s odd market movement has been reversed and the Pound has rallied back against the Euro to 1.163.

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