By TraderVox.com
Tradervox.com (Dublin) – The Bank of England meeting minutes indicated that policy makers are unlikely to cut interest rates after they voted 8-1 to halt the asset purchases program. The UK gilts declined for the first time in five weeks after the report was released. The UK currency also depreciated from the second week against the euro as optimism of an agreement between euro zone finance ministers boosted the demand for the euro. The pound advanced against the greenback for the first time in a month as investors increase their bets the US lawmakers will avert the fiscal cliff facing the US economy.
According to Jason Simpson, a rates strategist in London at Banco Santander SA, the Bank of England meeting minutes were bearish for the gilts. The minutes suggested that the bar for additional QE has been raised higher. Simpson also noted that the lawmakers expressly ruled out the possibility of interest rate cut in the near term. This is an indication that the BOE is changing its view on the economy. Mervyn King, the BOE Governor and his two deputies have expressed their concerns about the effectiveness of additional quantitative easing measures.
The BOE meeting minutes which were released on November 21 indicated that David Miles, one of the policy makers voted for a 25 billion-pound increment on the bond-buying program unlike the majority who said there was no need for additional stimulus. The committee was however unanimous in voting to keep benchmark interest rates at its lowest of 0.5 percent, indicating that it is unlikely to reduce it further in the foreseeable future.
The Sterling pound dropped by 0.8 percent against the euro to 80.84 pence per euro from November 16 to the close of the week on Friday 23. The currency advanced against the dollar last week, to make a remarkable weekly gain of 0.9 percent to close the week at $1.6028.
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