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Pound Falls After Bank Of England Minutes

In early European deals on Wednesday, the pound weakened against other major currencies after the release of the Bank of England's minutes of the Monetary Policy Committee meeting held in July.

The minutes revealed that Bank of England policymakers raised the size of economic stimulus by GBP 50 billion this month through a split vote as Spencer Dale and Ben Broadbent voted to retain it at GBP 325 billion.

At the meeting held on July 4 and 5, seven members of the Monetary Policy Committee including Governor Mervyn King sought an increase in quantitative easing to GBP 375 billion. All nine of the members voted to hold the interest rate at a record low 0.50 percent.

The minutes also showed that the committee is likely to examine the case for a reduction in bank rate below 0.5 percent after taking into account the impact of policy initiatives.

Meanwhile, the latest figures from the Office for National Statistics showed that British unemployment rate declined in the quarter to May.

The ILO unemployment rate fell to 8.1 percent in March-May from a revised 8.3 percent in the three months through February. Economists expected the rate to remain unchanged from the February quarter's original figure of 8.2 percent.

The jobless claims rose by 6,100 in June from a month earlier, compared to forecasts for an increase of 5,000.

The pound that moved sideways against the euro and franc in the Asian session fell at 4:30 am ET. The pound dropped to 1.5267 against the franc and 0.7871 against the euro, compared to yesterday's close of 1.5301 and 0.7855, respectively. The next downside target level for the pound is seen at 0.79 against the euro and 1.51 against the franc.

The pound that advanced to 1.5671 against the U.S. dollar in early Asian trading declined shortly. The pound-dollar pair is now trading at 1.5629 with 1.555 seen as the next downside target level. The pair closed Tuesday's deals at 1.5657.

Against the yen, the U.K. currency is presently trading at 123.53, down from early Asian session's 6-day high of 123.95. If the pound falls further, it may target 122.5 level. At Tuesday's close, the pound was worth 123.81 against the yen.

Members of the Bank of Japan's Monetary Policy Board felt that the Japanese economy is showing signs of recovery as domestic demand remains firm, minutes from the bank's meeting on June 14 and 15 revealed today.

At the meeting, the policy board unanimously decided to hold the key uncollateralized overnight call rate at around 0 to 0.1 percent. The size of the asset purchase fund and credit facility was also left unchanged at JPY 40 trillion and JPY 30 trillion, respectively.

Looking ahead, the U.S. housing starts and building permits for June, the Federal Reserve's Beige book Economic survey results are due in the New York session.

The Federal Reserve Chairman will continue delivering his semi-annual testimony before the house at 10:00 am ET.

by RTTNews Staff Writer

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