After nearly 200 gatherings, Mervyn King attended his final policy meeting as Governor of the Bank of England today. As predicted by industry experts, the central bank’s Monetary Policy Committee retained its current target for asset purchases and held the key interest rate at a record low of 0.5 per cent.
The Pound Sterling Exchange Rate was in the region of 1.5461 against the US Dollar as of 13:00 GMT
Given that King is handing over the reins of the BOE to Mark Carney (currently Governor of the Bank of Canada) at the beginning of July, a change in policy was unlikely and it seems that it will indeed be left to the new Governor to decide what steps to take going forward.
Although King acknowledged that there are ‘signs now of a recovery’ in the UK economy, he asserted that growth isn’t as rapid as he would like to see.
Sterling continued to trade in the region of 1.545 against its American counterpart (GBP/USD)
Similarly, former MPC member Kate Barker comments: ‘King will be pleased to be leaving at a point when growth is picking up, though it must be hard for any of us to feel satisfied. It’s not recovering at the kind of rate that comes up to escape velocity and the question is whether monetary policy alone is enough to do that. I’m sceptical.’
Before the Bank of England made its announcement the Pound was able to rise to a month high against the US Dollar in response to positive housing data and Sterling continued to trade in the region of 1.545 + against its American counterpart after the meeting.
As senior currency strategist Jane Foley notes: ‘Everybody anticipated that it would be a fairly non-event meeting today. I probably will tweak my sterling forecasts just to make them a bit stronger by the end of the year on the back of the data that we’ve seen.’
Earlier today a report released by Halifax showed that UK home prices rose for a fourth month in May, a further sign that the economy is recovering. This week manufacturing, construction and services PMI all beat economists’ expectations.
However, prior to the BOE rate decision currency strategist Adam Cole observed: ‘Cable largely is taking its direction from the Dollar rather than Sterling. We’re waiting for central-bank announcements today and probably more importantly the payrolls number tomorrow.’
Economists are expecting the non-farm payrolls report to show that the US economy added as many workers in May as they did in the previous month. As many are viewing this report as a key component in the Federal Reserve’s decision of whether or not to taper stimulus a surprising result is likely to be the cause of notable volatility.
Current Pound Sterling (GBP) Exchange Rates
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5461 >
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1783 >
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.6283 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9456 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6471 <
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8486 <
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6154 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5156 <
(As of 13:00 GMT)
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