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Sterling slips against euro, pressured by QE speculation

Sterling slipped against a broadly stronger euro yesterday, and hovered near a seven-week trough against the dollar on speculation that recent soft UK data may eventually lead the Bank of England to resort to more monetary stimulus. The BoE is expected to hold interest rates at a record low 0.5 percent and refrain from adding to its bond buying programme when it ends its policy meeting this afternoon. Although the central bank is widely expected to keep rates on hold through late 2012, there is still a good chance the BoE will resort to another bout of asset purchases to support the flagging economy. More quantitative easing would be negative for the pound as it would flood the market with currency, reducing demand. Data yesterday showed Industrial Output unexpectedly fell 0.2 percent on the month in July, highlighting the economy’s shaky recovery. Sterling was flat at 1.5936 after an earlier rise to $1.5936 after an earlier rise to $1.6040 was met with strong offers through $1.6020, and pushed the pound towards a seven-week low of $1.5921 hit on Tuesday.
Data: 12.00: Official Bank Rate; Asset Purchase facility.


While most economists expect the ECB to leave its benchmark rate unchanged at 1.5 percent this meeting, we may see President Jean-Claude Trichet continue to soften his hawkish tone for monetary policy as the region faces a slowing recovery. Heightening fears surrounding the sovereign debt crisis paired with the increased risk of a double dip recession may encourage Mr Trichet to talk down speculation for higher borrowing costs, and the Governing Council may show an increased willingness to delay its exit strategy further as European policy makers struggle to restore investor confidence.  Yesterday we saw the euro top at around 1.1400 before steadily ticking down to currently trade at 1.1330.  
Data 12.45: Minimum bid rate. 13.30: ECB Press Conference.


The dollar strengthened against all but one of its 16 major counterparts before President Barack Obama unveils proposals to spur job growth and the US economy. The greenback snapped yesterday’s losses versus the yen and the euro on prospects Obama’s plans will make it less likely that Federal Reserve Chairman Ben Bernanke will add to monetary easing. The 17 nation currency fell against its US counterpart on speculation European Central Bank President Jean-Claude Trichet will signal a less aggressive stance toward inflation. The dollar fetched $1.4060 per euro this morning in London from $1.4098 in New York yesterday.
Data: 13.30: Trade Balance; Unemployment Claims. 18.00: Fed Chairman Bernanke Speaks.


• Chinese officials told European Union business executives that the yuan will achieve ‘full convertibility’ by 2015, EU Chamber of Commerce in China President David Cucino said.


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GBP/USD                        1.5925

GBP/EUR                        1.1320

EUR/USD                        1.4065

GBP/JPY                         123.20

GBP/AUD                        1.5035

GBP/NZD                         1.9130

GBP/ZAR                         11.3820

GBP/CHF                         1.3730

GBP/CAD                        1.5700

GBP/SGD                        1.9280

GBP/THB                         47.75

GBP/HKD                        12.4110

red-down; blue-up (snap shot)

These rates are for indication purposes only.


For more information or to get the latest spot rates contact:

John Paul Georgiou

Senior Foreign Exchange Broker

+44 (0) 20 7959 6917      


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