Pound Advances As BoE's MPC Split 7-2 On Interest Rate Decision

05:52, 20th August 2014

(RTTNews) - The pound gained ground against the other major currencies in European deals on Wednesday, as minutes from the Bank of England's latest monetary policy meeting showed that two members of the monetary policy committee voted for an immediate rise in bank rate, arguing that rapid fall in unemployment create prospects that wage growth would pick up.

Ian McCafferty and Martin Weale voted against the proposition to maintain rates and recommended to increase bank rate by 25 basis points to 0.75 percent. Meanwhile, all other seven members of the Monetary Policy Committee voted to keep the rate unchanged at 0.50 percent.

Ian McCafferty and Martin Weale argued that economic circumstances were sufficient to justify an immediate rise in Bank Rate. Even after a rise of 25 basis points in Bank Rate, monetary policy would remain extremely supportive, and an early rise would facilitate the Committee's aspiration that the rises in Bank Rate should be only gradual.

Regarding the stock of purchased assets, the MPC unanimously voted to leave the the programme unchanged at GBP 375 billion.

Reversing from an early low of 170.95 against the yen, the pound moved up to a 1-week high of 172.23. The next possible resistance for the pound-yen pair lies around the 173.00 zone.

Japan saw a merchandise trade deficit of 963.99 billion yen in July, the Ministry of Finance showed.

That missed forecasts for a deficit of 713.9 billion yen following the 823.2 billion yen shortfall in June.

The pound spiked up to a 1-week high of 0.7969 against the euro, after sliding to 0.8016 in early deals. If the pound continues its rise, 0.79 is likely seen as its next possible resistance area.

Germany's producer prices continued to decline in July, data from Destatis showed.

Producer prices were down 0.8 percent year-on-year in July, sharper than the 0.7 percent fall seen in June. Economists had forecast prices to fall again by 0.7 percent.

The pound appreciated to a 1-week high of 1.5185 against the Swiss franc from an early low of 1.5105. The next possible resistance for the pound may be eyed around the 1.525 mark.

The pound snapped back from an early 4-1/2-month low of 1.6600 against the greenback, edging up to 1.6678 amid the release of the minutes. The pound is likely to target resistance around the 1.675 region.

Looking ahead, the U.S. Federal Reserve's minutes of the July 29-30 monetary policy meeting is due at 2:00 pm ET.