Bank of England minutes today

21 November, 2012

Tom Arnold

Today’s expectations are very much hinged on what happens when the Bank of England’s monthly meeting minutes come out at 9.30am. This is a release of the minutes from the BoE’s Monetary Policy Committee meeting at the beginning of the month and gives an insight into what they discussed, together with the all important vote count for interest rate movement and quantitative easing. There is absolutely zero possibility of interest rate movement, but the question of more quantitative easing is a more contentious one. The UK economy could probably do with a further injection of funds and an extension of the QE scheme, but with inflation making a surprise U-turn and rising sharply in the last month, it would be a very brave, some might say stupid, decision to further increase price pressure by devaluing Sterling. However the meeting and vote were cast before the inflation figure was released, so we could well see a QE positive vote, i.e. not a unanimous vote against, despite inflation, which will almost certainly weaken the Pound.

We do also have some more important UK data out this morning at 9.30am – Public Sector Net Borrowing. Government borrowing is obviously very much in focus at the moment, with deficit reduction at the top of the agenda, so the question is – has George been able to keep us on the straight and narrow or has he had his hand in the cookie jar? Obviously if the figure is high then the Pound will again be under pressure.

The Eurozone have once again been unable to agree on the Greece situation, and in what is being described as a fiasco, the latest meeting of EU finance ministers broke up without agreement. They are unlikely to meet and discuss things further until the beginning of next week, and as such everything is very much in limbo again until then. In the short term this does seem to have weakened the Euro a little and as a result strengthened the safe haven US Dollar. I wouldn’t necessarily expect this to continue though as the EU ministers have to make their minds up sooner or later or face some unwontedly dire consequences.

Putting all of this together we are in for another rocky road in the coming days, so if you have a currency requirement coming up, make sure you stay in close contact with your CI account manager.