The Bank of England minutes pushed Sterling sharply higher against the US dollar at 1.5245 as The Bank of England’s monetary policy committee voted 9-0 to leave interest rates and quantitative easing unchanged. This sharp rally in Sterling should be used as an opportunity to short the pound again against the US dollar. The 1.50 USD level should be broken before the month is out again.
The two doves on the committee, Paul Fisher and David Miles, changed their position having voted for another £25bn of bond-buying at recent meetings. The Bank of England minutes showed that the MPC’s doves didn’t stop arguing in favour of more stimulus measures, but decided not to actually vote for it. The minutes explained that “most members” wanted to leave the current situation (interest rates at 0.5% and £375bn of bonds bought with new QE money) intact.
Guest post by Ronnie Chopra of Tradenext.
With the new governor of the Bank of England, Mark Carney keen on quantitative easing (QE) to buy gilts, this will continue to put downward pressure on Sterling. Carney has mentioned that the UK economy will move from a consumer based one to an export oriented one -again putting further pressure on the pound and weakening the currency.
The US economy is showing signs of growth and is in a much better position than the UK and this should support the US dollar. The on-going problems in the Middle East, (notably Egypt and Syria) the civil unrest in South America and parts of Europe will mean that the greenback will be in demand for being the currency in a crisis. Continue to buy the USD on any weakness and sell the British pound.
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