Wednesday June 20, 2007 - 10:29:20 GMT
Share This Story
INVESTICA Ltd - www.investica.co.uk
MPC minutes boost Sterling
Following the Bank of England minutes, there will be increased expectations of a July increase in interest rates to 5.75% which will provide further near-term Sterling support. Carry trades will contribute to increased volatility
The UK currency was holding firm in early Europe on Wednesday and strengthened after the Bank of England minutes were released with Sterling pushing above the 1.99 level against the dollar.
The Bank of England minutes from the June meeting recorded a 5-4 vote for unchanged rates. The minority wanted a further immediate increase in rates to curb inflationary pressure. The overall tone of the minutes was firm and will increase expectations that rates will be increased at the July meeting. These expectations will provide short-term Sterling support, especially as the money supply and mortgage lending data released at the same time was also robust.
The Governor's vote for a rate increase will also intensify expectations of a July increase. From a longer-term perspective, the overall economic risks are continuing to increase with a growing threat of a hard landing which would weaken Sterling sharply later in 2007. Any evidence of a significant slowdown in spending over the next two weeks would also result in a shift in expectations which would undermine Sterling. The key fact is that further interest rate increases are already priced in which will limit the potential for aggressive Sterling buying.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."