GBPEUR/GBPUSD

The Pound rallied against the U.S Dollar and the Euro yesterday, bouncing back from the previous day's decline, after the minutes from the Bank of England's last policy meeting showed that one more member joined Andrew Sentance in recommending an interest rate increase from the current 0.5%. Policy maker Martin Weale, a relatively new member on the monetary policy committee, put forward his wish to increase borrowing costs, after a report last week showed that UK inflation has accelerated to 3.7%.
The governor Mervyn King said in a speech that consumer prices may breach the 5% barrier this year, but with the economy slumping back into a recession, the central bank faces a difficult balancing act in the months ahead. In stark contrast, MPC member Adam Posen, once again, voted to expand the quantitative easing program from £200 billion to aid the recovery, while the other six members adopted a "wait-and-see" approach.
The GDP data on Tuesday has dispelled any prospect of an interest rate hike before the fourth quarter, but the minutes yesterday may provide an underlying degree of support to Sterling, as at least one more member has joined Sentance in his campaign for higher rates. The minutes stated that "for most members, recent developments implied that the risk to inflation in the medium term had probably shifted upwards. For two members, the evidence suggested that the balance of risks was already sufficiently clear to warrant an immediate increase.".. Read more