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The Bank of England left its monetary levers untouched

The Bank of England left its monetary levers untouched

The Bank of England’s Monetary Policy Committee kept the Bank Rate unchanged at 0.5% and maintained the size of the asset purchase programme at £375bn. The Q4 2012 Credit Conditions Survey provided some hope that the Funding for Lending Scheme may be easing credit and it is likely the members want to wait and see how this feeds into the lending data over the coming months.

The European Central Bank agreed to maintain rates at the current level as improving economic sentiment pointed to a gradual recovery this year. Rate cuts were discussed but the decision to keep them on hold was unanimous suggesting those members who wanted a cut at last month’s meeting are now more comfortable with keeping them on hold. ECB President Mario Draghi told a news conference that “economic weakness in the Eurozone is expected to continue into 2013”, he added that economic activity should gradually recover later in the year.

In the US, the shaky recovery in the jobs market was evidenced as more Americans filed new applications for unemployment benefit. Jobless claims increased by 4,000 to 371,000 in the week ending 5 January according to the Labor Department. The previous week’s figure was revised to show 5,000 fewer applications than previously reported. Claims at this time of year can be volatile because of holidays and seasonal layoffs.

On the FX markets, GBP/USD was under pressure hitting a low of $1.5990 in London yesterday as the run of weak UK data raised worries about the economic outlook. Sterling is currently trading at the $1.6010 level. The USD also made gains against the EUR following the weak German data, slipping to a low of $1.3035.

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