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Sterling rocky as quantitative easing looks likely

Published:  22 September, 2011

Sterling had a rocky day yesterday after the Bank of England minutes showed policymakers leaning towards another round of quantitative easing.

Currency Rates
EURO/GBP - 1.1416
US$/GBP - 1.5491
CHF/GBP - 1.3961
CAN$/GBP - 1.5671
AUS$/GBP - 1.5473
ZAR/GBP - 12.7145
JPY/GBP - 118.71
HKD/GBP - 12.0830
NZD/GBP - 1.9418
SEK/GBP - 10.5346
US$/EURO - 1.3554

This caused the pound to hit an eight-month low versus the US dollar and a two-and-a-half-year low against the yen. The minutes revealed that policy makers' outlook on a robust UK recovery is deteriorating with monetary easing likely to come into practice as soon as October. Data out yesterday also showed UK government borrowing rose unexpectedly in the month of August by £1.9bn. Out later on tomorrow are housing figures.

In the Euro zone, the euro fell 0.8% versus the US dollar whilst falling 1.4% over the past month among 10 developed nation currencies. Investor worry that Greece may default on its debt is still the focal concern. Greek government bonds also fell yesterday whilst Euro zone policy makers organise another meeting in Athens to try and resolve the country's crisis. Out today there is German manufacturing data. As the largest economy in the Euro zone, this may cause significant movement.

In the US, the US dollar appreciated 0.2% versus the euro as pressing concern over the Greek crisis continues to push investors towards safe haven currencies. Better then expected housing data came in yesterday with existing home sales increasing 7.7% since last month. Analysts have argued that it is largely due to a rise in the cost of rent. Many are waiting for the result of the Federal Reserve's two day meeting which concludes today. Market players are expecting the Federal Reserve to announce further monetary easing for the US economy.

Elsewhere, the New Zealand dollar depreciated versus the US dollar yesterday after data demonstrated the nation's deficit widened more than expected. Due to the Euro zone crisis deepening and a slow down in the demand for goods, the Norges Bank left interest rates unchanged at 2.25%.

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