Bank of England minutes this morning, what impact will this have on the pound? (Mike Vaughan)

GBPEUR rate remains steady as markets await the Autumn Budget

Today, as the country pays its last respects to the Iron Lady, the Bank of England will release its latest minutes from the interest rate decision held at the beginning of the month. The minutes are widely scrutinised for any clues as to future monetary policy and in particular whether the bank is considering further QE (Quantitative Easing). It is my view that the bank will not consider any QE in the short term and I hope the pound may have a positive day as a result. Of course any indication that QE will be considered again and the pound could fall across the board against the majors – for this reason today could prove very volatile.

For me the Bank of England will hold steady on any radical policies until the result of the latest GDP figures on the 25th April are released. This will officially confirm whether the UK has avoided recession, and I feel the result will be very close. With the NIESR (National Institute for Economic and Social Research) just last week forecasting revised figures of 0.1% I am confident the UK will scrape through and we may see sterling strength as a result. I would hope to see GBP/EUR moving towards 1.18, GBP/USD towards 1.55 and GBP/AUD breaking the 1.50 barrier.

IMF cuts global growth for the fourth consecutive time

Yesterday the International Monetary Fund (IMF) headed by Christine Legarde reduced its global growth forecast and urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world, its then stated it felt the global economy to grow a further 3.3% this year, less than the 3.5% forecast in January, after 3.2% growth in 2012 – this beings its fourth consecutive reduction in a row. The market didn’t react a great deal, as this news is of little surprise due to the state of much of the economic world, however it still is not particularly positive.

China’s growth forecast, is this a concern for the global economy?

Although figures from China were poor they are still considerably higher than much of the developed world, however signs that China is slowing may give cause to concern for the commodity based currencies such as the AUD and ZAR. Following the reduced forecasts the AUD weakened over 1.5% and the ZAR over 2.5% against the pound, a trend that may continue, all be it on not such a heavy scale. Figures for GBP/AUD are the best in nearly 6 weeks (1.4850) and GBP/ZAR has reached above 14 – I would expect those buying these currencies to get better opportunities in the next few days but these levels may not hang around for too long.

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