Daily currency report

The Bank of England delivered a stunning £75 billion increase in its quantitative easing programme. The surprise announcement, which took the central bank’s asset buying scheme to a total of £275 billion, caught most investors off-guard who had predicted a smaller injection of £50 billion in November. Accordingly, the pound tumbled across the board, reaching 13-month lows against the US dollar before recovering later in the day with some analysts encouraged somewhat by the Bank of England’s bold and proactive move. The European Central Bank resisted pressure to cut interest rates from 1.5 per cent in its meeting but did re-open long-term credit facilities and resume its controversial bond buying tactic. Although sweeping measures encouraged a little risk taking supported by equity market drive, investors are still very much leaning towards safer assets including the US dollar and yen.

Sterling

While interest rates were kept at a record low of 0.5 per cent, sterling suffered broad based declines after the Bank of England increased its quantitative easing programme by another £75 billion. Although UK economic conditions warrant more stimulus, it was widely expected that the bank’s monetary policy committee would wait until their November meeting for an opportunity to examine Q3 growth figures.

US Dollar

US non-farm payrolls and unemployment figures for the month of September will highlight the global calendar. Employment is forecast to increase by a total of 60,000 and although that would represent a vast improvement on Augusts zero change, the result may do little to ease unemployment concerns. The overall jobless rate is expected to remain at 9.1 per cent but analysts will probably scrutinise every last of piece evidence in order to judge future prospects. Consequently, anything slightly negative could persuade investors to drive back into more sheltered assets such as the US dollar.

Euro

The European Central Bank kept benchmark interest rates at 1.5 per cent but did, however, decide to adopt more policy tools in response to the region’s financial troubles. In his last interview as President, Jean-Claude Trichet said the ECB will resume bond purchases in order to help stabilise borrowing. Furthermore, the central bank also announced that it will again offer banks access to secure long-term funding in response to tightening credit conditions.

Japanese yen

In contrast to other central banks, the Bank of Japan held monetary policy unchanged. Interest rates were maintained at 0-0.1 per cent and there was also no increase in the bank’s asset buying scheme.

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