The British Monetary Policy Committee left the interest rate unchanged at 0.50% and the bond buying program unchanged at 325 billion pounds. Some had expected an expansion in QE.
GBP/USD dropped under the 1.55 line before the release and is now pushing higher. It went as high as 1.5539 before retreating, and is now continuing the upwards move.
In the recent inflation report, Mervyn King and his colleagues emphasized concerns and certainly left the door open for more QE. The most recent expansion, from 275 to 325 billion already ran its course.
As no change was announced, no accompanying statement was issued. We will get to see how many members voted for an expansion of the Asset Purchase Facility in the meeting minutes, due in around two weeks. In the past two sessions, only member supported more QE.
On the other hand, the euro crisis pushed money into British bonds, pushing yields lower. So, the effectiveness of more purchases seemed very limited.
Earlier, British Services PMI surprised to the upside and stayed unchanged at 53.3 points. A drop was expected in this important forward looking indicator of Britain’s biggest sector.
For more on the pound, see the GBPUSD forecast.
The pound is also enjoying the positive global atmosphere: there is a sense that leaders are finally stepping up. This may be a false sentiment, but it prevails for now.
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