Sterling weakened versus 10 of its 16 major peers despite the Bank of England’s Monetary Policy Committee voting unanimously at 9-0 to keep quantitative easing at £375bn and keep interest rates low.
In terms of their view on the economic recovery, they estimate that growth in the second half of the year would remain around 0.7% a quarter or a little higher which is stronger than expected from August’s inflation report. The BoE also felt that the recent reduction in the unemployment rate to 7.7% was reducing slightly faster than expected. Despite the positive outlook it failed to have much effect on the pound.
We saw the Canadian dollar weaken yesterday. The Bank of Canada held its interest rate at 1% and cut its outlook for economic growth to 1.6% for this year and 2.3% for next year. This is in contrast to the report in July where they predicted growth of 1.8% for this year and 2.7% next year. This sent GBP/CAD to a fresh three year high.
Despite manufacturing and service sector figures falling below expectations in the euro zone, the euro is continuing to gather strength, reaching a new two year high against the US dollar.
The pound has weakened throughout the day following a report from the Confederation of British Industry showing that manufacturing fell in September. Later this afternoon the market will be awaiting a speech to be made by BoE Governor Mark Carney.
Data released this afternoon from the US has shown that the number of people filing for jobless claims fell from the previous week, which gave the US dollar a bit of relief.
17.45pm – GBP – BoE Governor Carney Speech.