GBP/USD moves higher, as there is no imminent danger of a new quantitative easing program. Regarding the rates: 7 members voted in favor of no change, and 2 voted for a hike, as expected. The meeting minutes by the MPC have shown that the committee remains reluctant to raise the interest rates, and is waiting for prices to fall. The current state of the British economy doesn’t allow it, but with QE2 not on the agenda at the moment, the pound found some relief.
Pound dollar rose from 1.6080 to 1.6120, moving above the pivotal 1.6110 line once again, after falling below it towards the release.
A discussion about a possibility of QE2 in Britain appeared in the last minutes. Although it was theoretical, and only one member supported it (Adam Posen), the talk about more pound printing hurt the British pound. No we see some relief in this field. There is less relief for the economy though.
The British Monetary Policy Committee only releases full statements when a change is made. In addition, the split within the MPC also makes it hard to produce a statement. So, the meeting minutes are the real show.
Last month’s minutes have shown that the new composition of the committee is less favorable of a hike. The absence of Andrew Sentance, the extreme hawk, makes the committee lean even more towards no change in the rates.
The next move on the rates isn’t expected until the second half of 2012, very far. This was now acknowledged in the minutes. Recent inflation data has also shown that there is less rush. Although the annual pace is still high at 4.2%, it is weaker than 4.5%, and also Core CPI is now below 3%.
GBP/USD dropped below the 1.6110 line before the publication. Support is found at 1.60, and higher resistance at 1.62.
For more abut the pair, see the British pound forecast.Get the 5 most predictable currency pairs