Sterling lost ground against the dollar today following the release of the Bank of England minutes from their October meeting. Trading opened this morning with the GBP/USD cross sitting above $1.6125 but after the minutes were released the pound slipped to a low of $1.6018 before recovering slightly this afternoon.
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For the third month running the Bank of England's Monetary Policy Committee (MPC) voted to keep interest rates in the UK at the current level of 0.5%. The minutes indicated there was "insufficient evidence" to warrant a rate rise, though two of the MPC members again voted to raise rates.
The fact two of the nine MPC members voted to raise rates came as bit of a surprise this morning. For the last two months the vote has been 7-2 in favour of keeping rates on hold and with consumer spending dropping I thought the vote could have changed to 8-1, especially as the Bank of England had access to Septembers inflation figures before they met.
With UK inflation currently standing at 1.2%, its lowest levels since 2009, any chance of a rate rise before the elections in spring now seem remarkably slim. The U.S. economy is still showing signs of recovery and if the Federal Reserve do wind up their stimulus package at the end of the month the GBP/USD cross could be open for further losses.
If things continue on this current path then I don't think it will be long until we see GBP/USD exchange rates drop and remain under $1.60 for a sustained period of time. One of the forecasts I received this morning showed GBP/USD could be down as low as $1.56 in the next 6 months which would take Sterling's losses against the dollar to around 9% since July.
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