In a topsy-turvy session the pound is down today against all of its major counterparts except the greenback. The UK currency plunged through support levels to be down almost a percent on the day against the euro, currently trading around €1.1660. However, sterling did enjoy gains against the US dollar, hitting an intraday high of $1.5713.
Sterling’s abysmal performance this week was not helped by the dovish tone of the MPC minutes from the meeting on September 8th. The notes showed an 8-1 vote in favour of holding interest rates at a record low of 0.5% with Andrew Sentence repeating his lone call for a rate hike. Comments from members showed genuine concern about the growth outlook for the economy and the very real potential for more quantitative easing.
Duncan Higgins, Senior Analyst at Caxton FX said ‘Despite the consumer price index holding at 3.1% last month, the members see little change in the upside risk to inflation. As long as inflationary pressures are downplayed, it appears the door is likely to remain open to further quantitative easing, a prospect that will continue to weigh on sterling going forward.’
In other news, last night the Federal Reserve lowered the level at which it would intervene with what it is being called Quantitative Easing II (QE2) causing the market to choose the path of least resistance and sell the greenback.
Tom Hampton
Analyst Caxton FX
