In spite of the US Dollar broadly declining yesterday in reaction to lacklustre US employment data, the Pound edged away from a three-week high against the ‘Greenback’ overnight and began the European session softer against peers like the Euro.
The Pound Sterling to US Dollar Exchange Rate was in the region of 1.6138 as of 10:30 GMT.
Although economists were expecting the Bank of England’s policy meeting minutes to show that the Monetary Policy Committee was united in its decision to leave rates and the level of asset purchases unaltered, Sterling struggled prior to their publication.
When released at 09:30 GMT the minutes did show that the MPC voted 9-0 in favour of maintaining the 375 billion Pound asset purchase programme and holding the benchmark interest rate at a historic low.
The minutes stated that ‘Surveys had continued to point to strong growth in the second half of the year, with Markit/CIPS activity indices remaining at high levels in September, and a sharp pickup in the BCC output and orders balances in Q3. By themselves, surveys would point to growth of around 1% a quarter in the d half of 2013. The Bank’s Agents also judged that output growth had picked up to at least trend rates in Q3. There were limited official data on the third quarter, but industrial production had fallen by 1.1% in August. Overall, Bank staff estimated that growth in the second half of the year would remain around 0.7% a quarter or a little higher, stronger than expected at the time of the August Inflation Report.’
The minutes continued; ‘The recovery in growth since the end of 2012 appeared in part to reflect a dissipation of uncertainty – for example, as the perceived tail risks in the euro area had receded – against the backdrop of considerable monetary stimulus.’
1 US Dollar is currently worth 0.6195 pence
It also became apparent in the minutes that the MPC believes that the unemployment rate will fall more rapidly than previously forecast, with the report stating; ‘It now therefore seemed probable that unemployment would be lower, and output growth faster, in the second half of 2013 than expected at the time of the August Inflation Report.’
As the BoE has tied the unemployment rate to interest rate increases, news that the MPC sees the rate approaching the 7 per cent target sooner than expected caused the Pound to extend declines against the US Dollar and Euro.
Although the Pound is feeling the pressure today, the British currency could recover losses on Friday if the UK’s GDP report shows the 0.8 per cent third quarter growth expected. If the report reflects forecasts it will be Britain’s fastest quarterly expansion since mid-2010.
As the European session progresses the GBP/EUR pairing could slide further if a gauge of consumer sentiment for the Eurozone rises by more than the 0.4 forecast.
Additional movement in the GBP/USD pairing could occur in response to US mortgage approvals figures and house price index.
Current Pound Sterling (GBP) Exchange Rates:
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.6138 <
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1732 <
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.6766 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9217 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6195 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8524 >
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5962 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5198 <
(As of 10:30 GMT)
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