Sterling rallied yesterday as the minutes from the latest MPC meeting showed a unified committee. Unanimous votes for a hold on interest rates at 0.5% and a hold on the amount of quantitative easing plus not even a soupcon of discussion over cutting the deposit rate for commercial banks were all greeted as a positive for the beleaguered pound.

While members Kind and Miles both went on record to say that ‘further loosening may be appropriate’ we believe they will hold their votes until November now.

Sterling rallied from a low yesterday of 1.1030 against the euro to finish above the 1.11 handle whilst moving into the 1.64s against the dollar.

The other key piece of data on markets yesterday was the FOMC meeting. As everyone expected they held rates within that buffer of 0% – 0.25% whilst pledging to keep rates at record lows for an ‘extended period’. The dollar was volatile on a trade weighted basis in the aftermath as it dipped to another yearly low before racing back as oil markets fell by 4% and equities were hammered lower. The Fed added that the “economy was recovering after a severe downturn” although constraints on further recovery included job losses and low levels of growth in wages.

Prospects for sterling are still fairly depressed even after yesterday’s news and we would need to see GBPEUR above 1.13 and GBPUSD above 1.66 for this to change.

Data today includes German IFO business climate (09.00) and US existing home sales (15.00).

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