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GBP under pressure as Bank of England minutes raise prospect of further QE

Written by Sam Coxhead on June 23rd, 2011.      0 comments

9:40 AM (NZT) The Bank of England June Monetary Policy Meeting minutes released in the offshore session were more dovish than anticipated with the prospects of an increased Quantitative Easing (QE) program to help boost the slumping UK economic growth. The cash rate was held firm at .5% as widely expected, but with the absence of aggressive"hawk" Andrew Sentance on the voting panel, the tone was less focussed on the high inflationary pressure.

The slow growth and prospects in the UK have caused the board concern, and the prospect of further QE will see the GBP under further pressure, as the prospect of any kind of normalisation of monetary policy is now a long way off.

The US Federal Reserve also issued its monthly monetary policy statement, and for the most part this can be viewed as acknowledging the lower threat of deflation as the inflationary pressures increase. Any real enthusiasm for higher interest rates was quelled by lower revisions of the forecast for 2011 employment growth and GDP.

Bernanke has all but ruled out a further quantitative easing program at this stage, and this saw slightly higher bond yields and lower stockmarkets.

The New Zealand dollar was the star performer overnight, gaining ground on all its major trading partners, especially the NZD/GBP pair.

    Last 24 hours trade
  Current level Low High
NZD/USD 0.8128 0.8114 0.8195
AUD/USD 1.0590 1.0566 1.0651
NZD/AUD 0.7677 0.7655 0.7713
AUD/NZD 1.3026 1.2965 1.3063
NZD/GBP 0.5013 0.4996 0.5082
NZD/EUR 0.5657 0.5633 0.5682
NZD/YEN 65.22 65.10 65.72
NZD/CAD 0.7907 0.7847 0.7972