Pound Performs Strongly Against Euro And US Dollar As BoE Policymakers Hints That QE May End

Published: Thursday, 1 November 2012 10:00 BST - Written by Tim Boyer

STORY LINK Pound Performs Strongly Against Euro And US Dollar As BoE Policymakers Hints That QE May End

Last night’s Asian session was marked by the release of a significantly stronger than anticipated Chinese PMI Manufacturing survey for October. The gauge of activity in the Far East’s leading economy’s key production sector showed an increase from September’s disappointing reading of 47.9 to print at a healthier 49.5. A reading of above 50 indicates that activity is increasing in the sector, so investors’ hopes are high that next month’s showing may signal a return to growth for China’s manufacturers.

The release has seen UK and European stock indices open higher than yesterday’s closing levels, indicating that appetite for risk remains buoyant. This has caused a shift out of the safe haven US Dollar from institutional investors, sending the GBP USD exchange rate as high as 1.6167 in early trading. The uptick in risk sentiment has the potential to favour the high-yielding Australian and New Zealand Dollars as today’s session progresses.

Meanwhile, the Pound has started the day strongly, following on from yesterday’s go-ahead performance. Yesterday afternoon brought comments from Deputy Bank of England Governor Charlie Bean, questioning the efficacy of the Bank’s ongoing Quantitative Easing programme. The comments have caused market participants to downgrade their views on the chances of an extension to the BoE’s £375bn asset purchase scheme at next Thursday’s policy meeting. Previous expectations had been that the nine-man MPC would opt to give Britain’s economy an end-of-year boost in the form of a further £50bn of QE at the meeting. The Pound is expected to perform more than respectably in the lead-up to the meeting following Bean’s comments.

Highlights for today come in the US this afternoon, with October’s Consumer Confidence and ISM Manufacturing surveys penned in for release. A better than anticipated showing for these two figures may well serve to further increase global appetite for risk, triggering further upside for the GBP USD exchange rate.

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