Bank of England Keeps Rates On Hold And Defers Further Quantitative Easing

The Monetary Policy Committee of the Bank of England decided that UK interest rates will remain on hold at 0.5% yesterday. The rate has remained unaltered since March 2009. There had been considerable speculation that the MPC might approve a further round of quantitative easing, but stronger than expected economic performance in the third quarter and improved manufacturing output data were enough to make the MPC defer this move. It is thought likely that the MPC will need to approve further quantitative easing at some stage as government cuts and the rise in VAT planned for January 2011 take effect, slowing economic output and putting pressure on employment. The US Dollar remains under considerable pressure following the US decision on quantitative easing and is now at a twenty eight year low against the Australian Dollar.

Pound Sterling – UK Markets

Yesterday's close saw £1 buying €1.1417, a decline of 0.6% on the day. In overnight trading, Sterling rallied against the Euro, but has retreated against the Euro slightly in early European trading and is currently trading at €1.1408 (at 08:40 GMT). The Pound has risen against the Dollar as the decision of the various central banks are absorbed and is currently trading at $1.6216 (at 08:40 GMT). In the initial aftermath of the decision, it was trading up by 2 cents against the Dollar but has retreated slightly from this position.

US Dollar – US Markets

The Federal Reserve's decision to inject $600 billion into the economy over the coming months has caused the Dollar to depreciate significantly against other major currencies. The Dollar was not helped by US weekly jobless figures which came in worse than expecting rising to 457,000. The currency remains vulnerable today with US payroll data out where another disappointing figure could fuel the Dollar's losses.

Euro – European Markets

The Euro closed up against the Dollar yesterday at $1.4244, a rise of 1.6% over the previous day's close. Currently, the Euro is trading at $1.4211 (at 08:46 GMT), having fallen back slightly in overnight trading. The European Central Bank held interest rates unchanged a 1% for the 18th consecutive month. The Irish government has announced ambitious austerity plans which are designed to reduce the deficit to 3% by 2014 from its current level which is predicted to be 32% in the wake of the crisis in the Irish banking and property sectors.

Other Currencies – Highlights

Data just released from Denmark indicates that Denmark's industrial production rose by 2.4% in September. Year-on-year industrial output was up by 11.6% in September, but this is on the back of a low base. Currently, the Euro is worth DKK 7.4547 and £1 will buy DKK 8.5114. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.