Bank of England could weaken Sterling today

17th November 2010
Good morning. Sterling fell sharply yesterday as Bank of England Governor Mervyn King signalled more quantitative easing could be possible, erasing gains made after higher than expected UK inflation data. Rates at 08:30am this morning are as follows:

  • GBP/EUR 1.1778
  • GBP/USD 1.5898
  • GBP/AUD 1.6308
  • GBP/NZD 2.0742
  • GBP/CAD 1.6271
  • GBP/CHF 1.5828
  • GBP/ZAR 11.214
  • GBP/JPY 132.54
  • GBP/HUF 326.10
  • EUR/USD 1.3493

Bank of England data could hurt Sterling

The UK Consumer Prices Index (CPI) inflation rate rose unexpectedly to 3.2% in October, official figures show, on the back of higher fuel prices. Analysts had expected the CPI figure to remain unchanged at 3.1%. The higher figure prompted the BoE governor to say that it is still possible the UK will follow the US in another round of Quantitative Easing. This would weaken the pound against other currencies.

Today we will see the minutes to the recent BoE meeting, and see the differences of view. This is released at 09:30am. If the minutes show a split on the decision not to embark on more stimulus then this will increase the chances of QE in the coming months. More QE will weaken the pound, and so today is a key day in terms of where the pound will go in the coming weeks and months.

Eurozone to help with Ireland’s debt situation

Plans are being made for a potential rescue programme to bail out the Irish government, if it asks for help, the EU’s finance commissioner says. Olli Rehn told reporters the plan would have an “accent on restructuring its banking sector”. His statement came at the end of an emergency meeting of eurozone ministers and financial institutions in Brussels.

Irish debt has weakened the Euro of late, and is part of the reason GBP/EUR rates are still close to €1.18.

Pound vs Euro forecast

Rates are high due to better UK data including the decision not to embark on further QE at the Bank of England. Irish debt has also weakened the Euro helping rates gain over recent weeks. With Ireland due to be bailed out, and today’s key data possibly showing that the BoE will indeed continue with QE measures, we think the current levels may be short lived.

If you need to purchase Euros in the coming months, consider a Forward contract to fix rates while levels are close to 2 month highs. Just over a month ago rates were as low as €1.11. Should rates retreat to these levels then a €150k would cost £7000 more than today. Contact us today to discuss the options available and see how much you could save with our commercial rates.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what’s happening in the currency markets.

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