The Pound retained gains made against the US Dollar following the release of UK industrial production figures and advanced by the most for a week against the Euro as the Bank of England opted to maintain the current level of asset purchases.
The Pound Sterling Exchange Rate was in the region of 0.8442 against the Euro as of 13:45 GMT
As forecast by the majority of economists the BoE retained the 375 billion Pound target for asset purchases and held the key interest rate at 0.5 per cent.
Sterling consequently rose to 0.8442 against the Euro and 1.5567 against the US Dollar.
In the eyes of the British Chambers of Commerce this was the right choice, as the central bank should be utilising other methods of bolstering business lending. In a statement released just after the BoE’s announcement the BCC commented: ‘Adding to QE would only provide marginal benefits for the economy, while increasing the risks of higher inflation and bubbles’.
Inflation continues to be above the BoE’s target of 2 per cent.
Although recent UK data has been looking more positive, ongoing problems in the Eurozone and economic concerns in the US are still weighing on the global economy and could support the case for additional stimulus further down the line.
Mervyn King, who stands down as Governor of the Bank of England in June, has been pushing for increased asset purchases for the last several meetings.
Following the report’s release one economist noted: ‘The UK data flow over the past month has been pretty good. We still feel that the recovery will be slow and the UK remains vulnerable to external shocks, particularly from the Eurozone, so there is the potential for further stimulus.’
Similarly, strategist John Wraith observed: ‘Quantitative easing is now on hold for some considerable time. The data’s been a little better and the pressing need to do more QE, as they saw it, may be slightly less pressing.’
In the first quarter of this year the UK economy expanded by 0.3 per cent, 0.2 per cent more than expected.
We will have to wait until May 5th and the publication of minutes from this latest meeting for a greater insight into the Bank of England’s decision.
Tomorrow’s UK construction output data is likely to be the next notable cause of Sterling movement.
Current Pound Sterling (GBP) Exchange Rates
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5567 >
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1845 >
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.5225 <
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.8404 <
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6423 <
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8442 <
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6568 >
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5427 >
(As of 13:45 GMT)
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