British Pound sterling: UK Currency is nervous ahead of key monetary decision, could 75bn GBP expansion be on the cards at BoE?

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Published on Wednesday, 04 July 2012 07:42

Written by Will Peters

International Money Transfers at our sister site

"These measures are factored in by the markets, so sterling should receive support, or even advance markedly, should no further measures be announced."

The pound sterling (Currency:GBP) continues to weaken ahead of tomorrow's big announcement concerning additional (or no additional) stimulus for the UK economy. Ahead of the event at the Bank of England we see:

The pound euro exchange rate is unchanged on Tuesday night's close, GBP-EUR is 12447 at 10:35 AM in London.

The pound dollar exchange rate is 0.18 pct lower, GBP-USD is at 1.5660.

The pound Australian dollar exchange rate is 0.09 pct lower at 1.5239. (We update our IMT site with the latest currency forecasts from the key investment houses. Use this Facbeook entry way to gain access and to be updated to changes).



Thursday is a big day for the UK currency as the Bank of England will reveal whether it will increase its balance sheet through the quantitative easing programme.

These measures are factored in by the markets, so sterling should receive support, or even advance markedly, should no further measures be announced.

Even the amount announced could be significant. UBS have today said, "The BoE meets this week and we continue to expect an expansion of GBP75 bn in the quantitative easing programme vs the consensus call of GBP50 bn."

An above consensus expansion of 75bn would certainly be a pound sterling negative. 

On the domestic front, UK credit and activity figures were mixed. The construction PMI fell sharply from 54.4 to 48.2, which could have implications for upcoming growth numbers.

Net lending secured on dwellings also fell to GBP0.6 bn (consensus: GBP1.0 bn). However, mortgage approvals were better than expected.

On the credit side, M4 was down 0.1% m/m and 4.1% y/y. The figures underscore the need for the BoE to optimise credit allocation, and given that the numbers display lending before the recent ECTR schemes, they should not be indicative of financing conditions in the coming months.