GBP EUR Exchange Rate Threatens New 4-Month Low As Investors Await Bank Of England Minutes

Modified: Tuesday, 16 October 2012 18:01 BST - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Threatens New 4-Month Low As Investors Await Bank Of England Minutes

This morning’s minutes of the Bank of England’s October monetary policy meeting, due for release at 0930hrs BST, will provide investors with clues regarding the potential for a trimming of UK interest rates in the near term and the likelihood of additional funds being allocated to Britain’s already extensive Quantitative Easing programme, which currently stands at £375bn. We already know that the BoE opted to maintain its existing monetary policy stance at the monthly meeting, so the key intrigue arising from the minutes will come in the form of the closely-monitored ‘vote breakdown’. The committee comprises of only nine members, so a small shift in sentiment amongst the group can lead to a policy change. Analysts will be poring over the memo for indications that Martin Weale, an affirmed dove, is starting to win over other members regarding the need for a rate cut. Weale has recently made positive noises in the British press regarding a reduction in the UK’s 0.50% base rate, which already represents a record low. Any suggestion that a cut might be on the cards would see Sterling tumble against the global market’s other major currencies.

The BoE minutes apart, today brings a relatively light data schedule, meaning that the notoriously mercurial and ever-present factor which is ‘risk sentiment’ will determine price action for the world’s leading currency pairs. Yesterday saw global equities markets post a relatively strong performance, with London’s FTSE 100 closing up by over 1%; Frankfurt’s Dax and Paris’s Cac 40 put up an even stronger showing on the day. The uptick in appetite for risk was triggered by escalating market babble concerning an imminent ESM-funded bailout for Spain. If these rumours gain momentum on the day today, then the GBP EUR exchange rate could lose further ground. Yesterday was a negative session for the pair and consecutive closes below the extant 4-month low of 1.2323 would sound a strong negative indicator moving forward.

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