Sterling continues to rise against the dollar as the Bank of England keep QE on hold

Sterling continued its recent rise against the U.S dollar on Thursday after the Bank of England (BoE) kept interest rates on hold and not extend their asset purchasing scheme. Rates climbed by over 1% from $1.5433 to $1.5596 as the GBP/USD looks to have put an end to its recent declines.

Some had feared (including myself) that the Bank of England announcement would lead to another round of quantitative easing which would have potentially led to cable falling back towards the $1.52 mark witnessed last week. When the BoE pump money into the economy it reduces the value of the pound and becomes cheaper to purchase.

The result may have been different had the UK’s services sector data not come in higher than forecast. The Markit/CIPS purchasing managers’ index released early in the day showed the sector had grown at a steady pace for May, coming in at 53.3 after a reading of 52.2 had been predicted. In two weeks time the minutes from the meeting will be released and will show how policymakers voted, last month saw an 8 -1 vote in favour of no QE, a closer vote may cause further unrest and could have an effect on exchange rates.

Over in the states Fed Chairman Ben Bernanke is due to give testimony to U.S Congress today (Thursday). Investors will be taking note of the meeting as Mr Bernanke may give an indication into the Feds thoughts on monetary stimulus for the U.S economy. Any talk of QE in the states could mean sterling making further gains against the dollar and moving away from the recent lows.

Today is another indication of just how volatile the markets can be and how speculation can affect exchange rates. If you are thinking of buying or selling dollars in the coming week click here to send me a no obligation enquiry and take the next step to making the most of your currency transaction.