No more QE, but no joy for Pound

8 March, 2013

Paul Newfield

Yesterday saw great change and volatility for the Pound as hugely important data was released. At 12pm the Bank of England decided that the interest rate would remain unchanged at 0.5% whilst the asset purchase facility also remained unchanged at £375bn – significantly, the decision to reject restarting quantitative easing was also in favour of the Pound. This led to a large and sudden jump in the strength of Sterling against other major currencies including both the US Dollar and the Euro.

However the positivity towards the British currency wasn’t to last as, despite far from strong data from the Euro zone, including German factory orders down 2.5%, with the interest rate remaining static at 0.75% the Euro improved significantly against the Pound, with European Central Bank President Mario Draghi saying that Europe’s stuttering economy will have to get even worse before he’ll consider cutting interest rates, although he also said that he sees the euro area economy stabilising in the first half of this year and rebounding in the second with medium term positivity and “gradual recovery” in the Euro zone. However, he warned that the ECB sees downside risks to economic growth.

In the United States, positive data releases included initial jobless claims, which was down 15k from 355k to 340k and consumer credit was up $1.65b to $16.15b meaning more people are borrowing, generally a good early indicator of economic growth. Less positive was an ever widening trade balance worsening from $43b to $44.45bn.

This morning sees crucial data released relating to Consumer Inflation Expectations in Britain and various data in the USA and Canada largely revolving around employment rates and jobs.

The market still shows much volatility, so if you have any upcoming transfers do keep in touch with your account manager at Currency Index to avoid missing out on the best exchange rates possible and stay one step ahead of the markets.