httpvh://www.youtube.com/watch?v=ruG4adXFEyE

The Bank of England minutes caused sterling to take a rapid dive yesterday morning, falling from, at the lowest point, around 1.167. The policy committee voted 8-1 in favour of keeping interest rates at 0.5% and quantitative easing unchanged. However, some members have been encouraged by the recent weak growth data to worry about the UK’s prospects, this is aggravated by worries from the US and Europe as well as the looming spending cuts.  The minutes were not certain that a new round of quantitative easing would need to be put in place but they did mention, ‘the Committee considered arguments in favour of a further easing in the stance of monetary policy’. This was a sign that willingness to put more quantitative easing had increased a touch from August and July. Apparently the BoE have said that the economy is torn between two risks; and increase in inflation stemming from above-target price rises and that the public sector cuts would not be offset by the weak public sector demand.

Interest rates on UK government debt fell by the sharpest amount in 18 months after the Federal Reserve decision in Washington to action a new round of stimulus measures to boost the US economy. This was part of a global reaction to the Fed’s decision which also saw a new spike in the price of gold and a fall in the dollar. Leaders in the House of Representatives will move ahead with a bill allowing the US to retaliate against China to manipulating its currency, which is raising the heat on the row between Beijing and Washington. It will likely lead to opposition from Beijing and a legal challenge from the WTO.

In the EU yesterday Consumer Confidence fell to -11.2 from -11 which was considerably below the expected -10, this came after Industrial New Orders plunged severely for July at a fall of 16.2%. This is an indication of a possible economic downturn throughout the EU.

There are a couple of important data releases to watch today, starting with Germany and the EU and their Purchasing Manager Index for both Manufacturing and Services. The UK butts in around 9:30 with the BBA mortgage approvals which measures the number of house loans issued by the BBA during the previous quarter. The US wakes up with a jolt as we will see Initial Jobless Claims and Existing Homes Sales from 13:30 this afternoon.