Lack of surprises in Bank Of England minutes

20 September, 2012

There were few surprises in the Bank Of England minutes yesterday, as all nine policymakers voted to keep interest rates and the quantitative easing total unchanged, an announcement in line with market expectations. However, the minutes showed that several members of the committee thought that further QE was “more likely than not to be needed in due course”, with one member stating there was a ‘good case’ for introducing further QE immediately. The possibility of further QE in the future caused sterling to drop in value slightly against both the dollar and the euro. Some market strategists, however, believe that sterling’s drop against the dollar was fuelled by its gains last week after the U.S. Federal Reserve announced another round of monetary easing for the US economy. The rise was so quick last week that investors are starting to wonder if it was the right choice to make, causing sterling to lose some of the gains it made.

News from the Eurozone is relatively quiet today, with investors continuing to hold their breath waiting for possible solutions to the crises, with much of the focus being placed on whether Spain will ask for a bailout, which will contribute to pressure on the euro, weakening it across the board. Later today, EU leaders are meeting with representatives from China, hoping to improve trade relations, which may provide a temporary solution to some of the Euro’s woes. If the results of this meeting are positive, we can expect the European currency to gain some strength against sterling. Meanwhile, an article on the BBC states that several businesses are ‘fleeing’ France in the fact of President Hollande’s new tax laws for businesses. If concerns about these new taxes continue to grow, it could prove incredibly troublesome for the French economy, and by extension, the single currency.

In the United States, it has been announced that house sales have risen to a two-year high over the past month, indicating a small level of recovery for the American economy. This has, no doubt, further suppressed the concern for the dollar caused by last week’s QE announcement by the Federal Reserve, and aided in the dollar gaining strength against both sterling and euro.

In slightly stranger news, the Bristol Pound came into effect yesterday, a new currency only usable at independent businesses in Bristol. Sadly, Currency Index currently doesn’t provide a conversion service for Bristol Pounds (The rate of which currently stands at 1:1 by the way), so you might have to search elsewhere if you require them. However, if you have any other currency requirements and are looking for the best rates available, don’t hesitate to give Currency Index a call.