Pound little changed against the US dollar

The pound enjoyed a small rally against the US dollar yesterday morning, as a brief rise in equity markets encouraged some investors to buy back into the riskier pound. However, sterling gave back its gains sharply in the afternoon when US shares pared most of their gains, following the US Treasury Department’s outline of its plans to aid insurers. But the dollar’s recovery was undermined somewhat by the minutes from the FOMC yesterday evening, which suggested an economic recovery was not expected until 2010, compared with its previous estimate of the end of this year. The pound therefore closed the day little changed against the dollar following this choppy trading.

The Bank of England concludes its two-day policy-setting meeting this afternoon, and is widely expected to leave interest rates on hold and continue its £75 billion bond buying scheme. The BoE has already cut interest rates to a record low of 0.5 percent, so it has little room to manoeuver further cuts.

Other news today includes Trade Balance figures and the Producer Price Index from the UK, while in the US Jobless Claims, the Import Price Index and Trade Balance figures are all released this afternoon.