Sterling hit one-month highs against the dollar and the euro as traders interpreted the Bank of England policy meeting minutes as a portent that an extension of quantitative easing next month may not be as likely as some market participants had expected. The Euro peaked at its highest level since August 2008 against the dollar as expectations that the Federal Reserve would keep US interest rates very low for some time yet continued to weigh on the dollar.

Sterling

The British pound jumped against most of its major trading partners, after the minutes of the Bank of England’s latest policy meeting dampened expectations of an extension to quantitative easing. The Bank of England minutes showed policymakers voted unanimously to leave its quantitative easing programme unchanged last month.

US Dollar

The dollar weakened versus the euro beyond key levels for the first time in 14 months. Optimism that the global economic recovery is gathering momentum increased demand for riskier assets at the expense of the greenback. This sentiment was echoed by comments from the Federal Reserve in its Beige Book business survey, which is published two weeks before officials meet to set monetary policy. It stated that its 12 district banks saw ‘stabilisation or modest improvements’ in many areas of the economy, led by housing and manufacturing, while all regions reported a weak or declining commercial real estate market.

Euro

With little in the way of eurozone data or European Central Bank announcements, the euro hovered at highs of over a year against the dollar, gaining from the heavy dollar sell-off.

Japanese Yen

The yen traded near a three week low against the dollar, as Japanese exports edged lower for the third straight month in September. A rising yen has hurt overseas shipments and a rebound driven by global stimulus spending and re-stocking of inventories has started to wane.