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20 Mar 2013
Forex Flash: Pound faces key tests today - BTMU
FXstreet.com (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ believes that the pound faces two key event risks today with the release of the latest BoE minutes from the 7th March meeting, and the release of the UK Budget.
The minutes revealed that the MPC voted 6-3 to hold asset purchases at GBP375 bln. Further, he expects that the Budget is unlikely to mark any material change in fiscal policy direction by the UK government although more evidence of fiscal slippage is likely to result in the Chancellor pushing back again the timing of when it intends to stabilize debt as a % of GDP. He writes, “The pound is likely to prove more sensitive to any announcements from the Chancellor that it is set to consider/ will alter the BoE’s inflation target remit which will support the pound’s weakening bias. The combination of weak growth and a perceived higher inflation tolerance has created a negative environment for the pound with the recent rebound more likely to prove only temporary.”
The minutes revealed that the MPC voted 6-3 to hold asset purchases at GBP375 bln. Further, he expects that the Budget is unlikely to mark any material change in fiscal policy direction by the UK government although more evidence of fiscal slippage is likely to result in the Chancellor pushing back again the timing of when it intends to stabilize debt as a % of GDP. He writes, “The pound is likely to prove more sensitive to any announcements from the Chancellor that it is set to consider/ will alter the BoE’s inflation target remit which will support the pound’s weakening bias. The combination of weak growth and a perceived higher inflation tolerance has created a negative environment for the pound with the recent rebound more likely to prove only temporary.”