The release of the Monetary Policy Committee minutes yesterday morning initially gave sterling a good boost taking it up to 1.5688 against the USD but the gains were short lived with the pound closing back below the 1.56 level. The minutes were not as dovish as the market had expected and nobody voted to extend the Quantitative Easing measures already in place. Whether this would be a good thing for the British economy is not as clear as originally thought with some economists seeing further QE measures as actually harming the economy rather than boosting it. The minutes made clear that they had not closed the door on further QE measures along with the usual vote from Andrew Sentence to raise rates by 0.25% as he had done for the previous 2 meetings.
This morning has seen a slew of data for the UK including the Retail Sales Figures coming in much better than expected for July increasing by 1.1% month on month instead of the 0.4% that was expected and taking the increase to 1.3% year on year. We have also had some data out for the UK finances showing Public Sector Net Borrowing figures which showed the borrowing decrease to £3.173bn in July along with the money supply increasing by 0.4% in July taking the year on year increase to 2.3%.
The Aussie Dollar has been having some problems recently, Wednesdays economic reports lowered expectations for the RBA to raise rates over the next year and with the Federal election coming up and no clear winner in view the possibility of a hung parliament is also weighing on the currency. Australian finances are in a much better state than the UK’s in our run up to the election so the possibility of a hung parliament is not going to hurt the AUD as much as it did in the UK.
With the decent news out for the UK this morning we should see a bit of a rally in the pound and hopefully reverse the losses from earlier in the week. With only the US jobless claims this afternoon it could prove to be a bit more of a positive day for the proud pound.
Posted in Daily Market News on May 30 2014