by Adam Solomon
Sterling / Euro and US Dollar
The Pound has declined heavily against the majors this morning, falling back towards 1.1280 against the Euro, while the UK currency also lost ground against the higher-yielding currencies, after the minutes from the Bank of England’s last policy meeting showed that policy makers voted 6-3 to keep rates unchanged this month.
The accompanying statement said that recent data on the economy over the last month had “probably been to the downside” and the Pound is declining on speculation that an increase in rates is still months away. Indeed, the Pound may trade as low as 1.07 against the Euro with the European Central Bank expected to raise rates again over the Summer, extending the yield advantage over the UK by another 25 basis points.
The minutes revealed that Andrew Sentance maintained his call for an increase of 50 basis points and he will have just one more month on the committee to push through an increase. Martin Weale and Spencer Dale also recommended a rate increase of 25 basis points, but the majority still kept the ‘wait-and-see’ policy, with markets predicting that the BoE will leave rates unchanged until the Autumn.