News Column

Pound Retreats After BoE Minutes

June 18, 2014

BRUSSELS (Alliance News) - The pound trimmed some its early gains against its key counterparts in European deals on Wednesday, as minutes from the Bank of England's June monetary policy meeting showed that there remains more slack that should be absorbed before increase in Bank Rate would be warranted and cautioned that premature rate hike would threaten growth.

Bank of England's policymakers agreed that, in the absence of other inflationary pressures, it would be necessary to see more evidence of slack being absorbed before an increase in Bank Rate would be warranted, the minutes from bank's meeting held on June 4 and 5 revealed.

The case for raising Bank Rate gradually and cautiously was reinforced by uncertainty over its likely impact on the economy, it said.

The precise timing of the rate hike would depend on the outlook for inflation. That, in turn, would depend on the data flow, and in particular what that implied for the degree of slack, the prospects for its absorption, and the broader outlook for wages.

At the meeting, the MPC voted to retain the record low 0.50% interest rate and quantitative easing at GBP 375 billion.

The pound that spiked up to 5-1/2-month high of 173.78 against the yen retreated to 173.09 in a short while. The pair was worth 173.20 at yesterday's close. On the downside, 172.00 is seen as next support level for the pound.

Japan saw a merchandise trade deficit of 908.963 billion yen in May, the Ministry of Finance said today.

That beat expectations for a shortfall of 1,189.3 billion yen following the 811.7 billion yen deficit in April.

The pound declined to a 5-day low of 1.6933 against the greenback, reversing from its recent 2-day high of 1.7001. The next possible downside target for the pound lies around the 1.685 mark. The pound-greenback pair finished yesterday's trading at 1.6963.

The pound eased to 1.5227 against the franc, coming off from a 2-day high of 1.5287 hit shortly ago. The pound may challenge support around the 1.51 level. At Tuesday's close, the pound-franc pair was worth 1.5248.

The pound fell to 0.8002 against the euro, after having advanced to a 2-day high of 0.7968 immediately after the release. Next likely support for the pound is seen at the 0.81 region. The pair was valued at 0.7983 when it ended deals yesterday.

The Eurozone construction sector recovered in April after contracting in March, Eurostat reported today.

Construction output rose 0.8% in April from March, when it was down 0.3%. The increase was driven by a 1% rise in building output, while civil engineering posted a 0.9% fall.

Looking ahead, the Federal Reserve will announce monetary policy decision at 2:00 pm ET. The interest rates are seen on hold at 0.25%, while the asset purchase program is expected to be slashed by USD10 billion to USD35 billion.

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Source: Alliance News

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