More NewsSterling Boosted as BoE Leaves Policy Unchanged

Sterling Boosted as BoE Leaves Policy Unchanged

Sterling has grown stronger following the Bank of England’s (BoE) decision to leave the quantitative easing (QE) budget on hold. There had been a rising tide of speculative bets recently that the BoE would follow the lead of the US and restart its asset purchase facility.

However, given the comparatively strong run of UK figures recently, including third quarter economic growth of 0.8%, the threat of an American style QEII has subsided. Confirmation of the Bank’s decision has given sterling a nudge higher, reclaiming the €1.14 level and pushing a nine-month high against a broadly weaker US dollar.

“It shouldn’t have come as too much of a surprise that the Bank opted against an extension of QE, but the outside possibility of a move had forced sterling lower. Although encouraging figures from UK of late are unlikely to deter the threat of QE entirely, the balance does appear to be swinging back in favour of the hawkish members of the MPC [Monetary Policy Committee],” said Duncan Higgins, analyst at Caxton FX.

It will be two weeks before the minutes of the BoE’s meeting are released but another three-way split in the vote looks like the most probable outcome. Both Adam Posen and Andrew Sentance have reiterated their respective views to extend QE and raise interest rates, but it remains unlikely that either will have found support this time around.

Higgins said: “The risks between weak economic growth and rising inflation are still finely balanced and it will be some time yet before the Bank can justifiably rule out another round of monetary stimulus.

“That sterling jumped half a cent following the Bank’s announcement is testament to the weight that QE places on the pound. But with that threat now lifted, at least in the short term, we see the pound steadily retracing its losses against the euro,” he added.

Related Articles

Preparing for GDPR? Here’s four things to consider

More News Preparing for GDPR? Here’s four things to consider

2m Elliott Wiseman
Cash flow in focus for investors

Cash Management Cash flow in focus for investors

3m Conor Deegan
Treasury TV: Karen Pugsley, Domino's Pizza Group

More News Treasury TV: Karen Pugsley, Domino's Pizza Group

3m Victoria Beckett
Treasury TV: Yeng Butler compares US and European MMF reforms

Compliance Treasury TV: Yeng Butler compares US and European MMF reforms

3m Victoria Beckett
Treasury TV: Tim de Knegt, The Port of Rotterdam

10 Minutes With The Treasury Treasury TV: Tim de Knegt, The Port of Rotterdam

4m Victoria Beckett
Banks are selling clients short with short dated cash deposit U-turns

Banking Banks are selling clients short with short dated cash deposit U-turns

4m Victoria Beckett
What does sterling’s Brexit boost mean for UK manufacturers?

More News What does sterling’s Brexit boost mean for UK manufacturers?

4m Tasja Botha
FX for corporates: 5 best practices for treasurers

Economy FX for corporates: 5 best practices for treasurers

4m Mateo Graziosi