The Euro (EUR) exchange rate advanced against the Pound (GBP) on Wednesday after the UK currency was weakened by the release of the minutes of the latest Bank of England policy meeting minutes, which showed that UK policy makers are concerned over the health of the economy.
Sterling fell against the majority of its most traded peers as the Bank of England minutes showed that policy makers voted in favour of keeping interest rates unchanged at 0.5% and voted unanimously to maintain its monthly bond buying programme unchanged at £375 billion.
Two policy makers, Martin Weale and Ian McCafferty voted for a third consecutive month to raise interest rates. The minutes showed that policy makers were cautious that the slowdown in the Eurozone and wider global economy was dragging upon the UK economy.
‘The Bank of England monetary policy meeting minutes painted a fairly bleak picture, suggesting that weaker growth and low inflation in the Eurozone has increased risks to the UK. In addition, with average earnings still struggle to keep with the low level of inflation a rate was not justified. Although two members did vote for a rate hike, the bank is a lot more dovish now,’ said economist Alex Edwards.
Against the US Dollar, the Euro fell to its lowest level in a week as speculation that the European Central Bank is considering adding to its stimulus measures. Also weighing on the Euro was a report, which showed that eleven major Eurozone banks would fail stress tests.
Economists are speculating that the ECB is considering expanding its asset-purchasing programme to include corporate bonds in a bid to encourage economic growth and inflation in the region. An ECB representative said that no decision had been taken but the report was seen as an indication that the bank is moving closer to quantitative easing.
US Data Supports Dollar
The US Dollar meanwhile was being buoyed by positive Consumer Price Inflation data.
According to the Washington based Department of Labour, consumer prices in the world’s largest economy increased by 0.1% last month, matching economist forecasts and countered last month’s reading of 0.2%.
Also aiding the ‘Greenback’ was a separate report, which showed that Mortgage applications in the USA increased strongly in the week ending October 13. Applications rose by 11.6%, up from the 5.6% increase recorded in the preceding week.
Euro Exchange Rate News:
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