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Kings last decision

Kings last decision

After 194 monetary policy decisions, Mervyn King, governor of the Bank of England cast his final vote as the MPC maintained Quantitative Easing at £375bn and left the Bank Rate unchanged at 0.5%. The recent improvements in UK economic indicators gave little reason for policy members to increase easing, and if the pace of recovery improves further, the debate could switch to how long can monetary policy remain as loose as it is.

 

Mark Carney takes over as governor next month and markets anticipate this will see the introduction of more explicit policy guidance in August.

 

In the Eurozone, the ECB left rates unchanged in line with market expectations. In the accompanying press conference, ECB president Draghi detailed how some unorthodox stimulus measures have known consequences, and others, such as negative interest rates, did not. He reiterated the ECB are “technically ready” for negative interest rates but the tone of his statement was aimed at lowering expectations of an early implementation of such a measure. 

 

The US dollar is under pressure ahead of this afternoon’s payroll report. A less dovish ECB statement and an easing in expectations that the Fed will taper QE prompted international investors to hold less US dollar positions. 

 

EUR/USD rose by 2 cents to a one month high of $1.3304 before easing back while GBP/USD made gains of almost 3 cents reaching $1.5683 overnight.

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