USD/GBP Rate & Comments for 23rd September 2010

USD/GBP - 1.566

Sterling fell to a 4 month low against the euro yesterday of 1.1662/£1 and a 2 month low against a basket of major currencies after the minutes of the Bank of England’s recent interest rate meeting showed that the Monetary Policy Committee were more willing to consider a fresh round of Quantitative Easing. Members voted 8-1 to hold rates with Andrew Sentance yet again standing alone in his call for an interest rate hike of 0.25%. The general consensus was that there were risks on both sides and stood ready to respond in either direction, with many feeling that it was more likely that they would need to inject further stimulus in the coming months. There was one upside today for sterling. The pound jumped against US dollar early this morning and broke the $1.57/ £1 barrier but this was more a function of a relatively weaker US dollar than sterling strength. Out today we have mortgage approval data which is expected to show a decline. Speak to a member of the team to protect yourself in case sterling drops even further.

In the USA, the financial markets were digesting the impact of the Federal Reserve’s interest rate decision that was released on Tuesday evening. There was a slight change in the language used, which effectively ramped up the level of readiness for an increase in the ‘accommodation’ level that the Fed provides. Effectively, this prepared the markets for more quantitative easing without actually altering monetary policy. In terms of data, there is weekly unemployment claims and existing home sales data. Speak to a member of the team to protect yourself against adverse market movements.

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