Bank Of England And ECB Interest Rate Decisions Send Pound Euro Rate Higher

Published: Friday, 9 November 2012 10:00 BST - Written by Minesh Chaudhari

STORY LINK Bank Of England And ECB Interest Rate Decisions Send Pound Euro Rate Higher

Yesterday’s two major central bank decisions were largely a non-event, with both the Bank of England and the European Central Bank maintaining their current monetary policies. The fallout from the two decisions saw the GBP EUR exchange rate climb to 1.2562 – its highest level since the 1st October. The pair moved sharply higher following the Bank of England policy decision at 12:00hrs GMT, suggesting that a fair percentage of market analysts had been anticipating an increase to the £375bn already allocated to the UK’s asset purchase scheme. GBP EUR dropped back later in the day as investors took on board ECB President Mario Draghi’s soothing comments during his post rate decision press conference.

Meanwhile, last night’s Asian session was significant due to the release of encouraging data from the world’s second largest economy. Both Industrial Production and Retail Sales numbers for last month bettered analysts’ expectations, suggesting Asia’s primary economic power is beginning to turn a corner. The positive effect on global risk sentiment from these data sets was augmented by the latest Chinese CPI Inflation numbers, also released last night, which came out at an annualised 1.7%. Such a manageable level of persistent price increases affords the Chinese central bank additional slack in order to further loosen the nation’s monetary policy during coming months. Look out for announcements that the People’s Bank of China has once again lowered the liquidity ratio of the country’s retail banks and for the Yuan to be allowed to weaken further against the US Dollar in the near-term.

Elsewhere, yesterday afternoon’s US trade figures revealed that the US’s trade gap fell to its lowest level since the latter part of 2010. The news has seen the US Dollar weaken against the Pound, Taking the GBP USD exchange rate from 1.5929 during yesterday morning’s session all the way up to 1.6020 overnight.

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