QE2 at $600bn – sterling hits nine-month high versus dollar
04/Nov/2010 • Currency Updates•
Sterling hit a nine-month high against the US dollar and strengthened versus the euro on Wednesday after the UK services PMI came in stronger-than-expected, reducing the prospects for more quantitative easing by the Bank of England.
The PMI’s main business activity index rose to 53.2 last month from 52.8 in September. This was the highest reading since June and has confounded analysts’ forecasts for a dip.
The markets will now look towards today’s Bank of England Interest Rate and Asset Purchase decisions released at 12:00.
The euro lost ground against the pound on Wednesday following on from positive UK Service Growth data, however a nine month high was achieved against the US dollar following on from the Federal Reserve’s Quantitative easing announcement.
On an extremely light day for macro economic data out of the Eurozone on Wednesday the markets attention now focuses on Thursday’s PMI data release coupled with the European Central Banks interest rate decision.
The US dollar fell to a nine-month low versus the pound and euro on Wednesday after the Federal Reserve said it will pump more money into the economy by boosting asset purchases to spur inflation and employment, debasing the world’s reserve currency.
The greenback fell against most major counterparts as the Fed said it will buy $600bn of Treasuries under a policy known as quantitative easing. The Treasury’s purchase was a slightly larger package than the market expected – $500bn spread out over six months, at $83bn a month. The Fed said it would now spread out its $600bn over eight months, at $75bn a month.
US ADP employment data beat expectations, rising 43,000 last month – above the 34,000 average since February. The Markets intention now turns to Friday’s non-farm payrolls which are also expected to rise by about 60,000, ending four months of falls.