The Euro (EUR) to Pound (GBP) exchange rate edged away from its lowest level in two-years on Wednesday but remains vulnerable following the release of the Bank of England’s (BoE) July policy meeting minutes.
Before the publication of the minutes the Pound briefly advanced to a fresh two-year high as weaker demand for the Euro combined with expectations that the minutes would show a more hawkish stance by the BoE policymakers.
The minutes however showed that the decision on whether to raise interest rates remained on hold as policy makers cited recent weak wage growth data as a sign that the economy needs more time to balance itself out. Te policymakers vote unanimously to maintain rates.
Last month’s data which showed that inflation in the UK increased to 1.9% caused policy makers to expect wages to rise stronger than they did.
According to the minutes the mixed signals made it difficult to gauge the amount of slack in the labour market.
Some members of the monetary policy committee were concerned that raising rates too early could destabilize the recovery, given recent signs of weakness in the global economic recovery.
Some economists are forecasting that the first votes to raise interest rates could come next month.
‘These minutes suggest that the debate on rate hikes is starting to open up, especially with the concluding line stating that while the ‘MPC agreed that no increase warranted at this meeting…for some members the decision had become more balanced in the past few months than earlier in the year’. Martin Weale, who voted for a rate rise in the January-July 2011 period, would be amongst the favourites to vote for a rise in August, but we have to remember there has been quite a lot of churn on the committee in recent months so there could be others,’ said James Knightly from ING.
Also putting some pressure upon the Pound was the release of a report by the British Banker’s Association which showed that the number of new mortgages approved increased to 43,300 last month from May’s revised total of 41,900, just below forecasts of 43,400.
The Euro also managed to hold its declines against the US Dollar as market sentiment recovered from the recent run of risk-off trading as a result of geopolitical events.
Tuesday’s decision by the European Union (EU) to introduce sanctions which targeted Russian individuals was deemed as soft by the markets and the threat of them harming the global economy was seen as low.
The USA was disappointed by the announcement as it had been hoping that the EU would impose harsher measures against Moscow.
With the Eurozone economy struggling EU leaders were looking out for their respective economies as many cannot take the risk of damaging them further.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3469 ,
Euro,,British Pound,0.7902 ,
Euro,,Australian Dollar,1.4253 ,
Euro,,Canadian Dollar,1.4422 ,