INVESTICA LTD  ^{Understanding Markets}

Daily market newsletter: 21st June 2006   

BOE minutes undermine Sterling

The Bank of England minutes recorded a 7-1 vote for unchanged interest rates in June with Walton again voting for an immediate 0.25% rate increase. The bank was concerned that weaker financial markets could slow growth and inflationary pressure, although there were considerable uncertainties as to whether the weakness in equity markets was the start of a more prolonged downward correction or just a temporary feature.

 

There were still concerns over inflationary pressure with a high degree of uncertainty over near-term economic developments. The bank is still concerned over the rate of credit and lending growth and any sharp recovery in financial markets would revive inflation fears.

 

The Mansion House speech from Bank of England Governor King tonight will be watched closely as the remarks are often used to signal the bank's underlying thinking and likely policy stance. Thoughts on the housing sector and wages will be particularly important for near-term expectations. Overall, near-term speculation over a UK interest rate increase will weaken and this will tend to weaken Sterling demand against the Euro, although sentiment could change rapidly.

 

Markets are still looking for higher global interest rates and this will limit the potential for Sterling buying interest on yield grounds even if there is renewed speculation over a UK rate increase.

 

Strengthen your site with the best analysis. Upgrade to the full professional and independent daily currency analysis for just US$125 per week. Please contact  info@investica.co.uk for further information.

This analysis is available for reproduction in full or in part provided that recognition is given to Investica Ltd or there is a link back to www.investica.co.uk

Copyright is held by Investica Ltd

This daily newsletter is available by E-mail for free. Please forward it on to any interested friends or colleagues or post it on your website. If you would like to be put on the mailing list, please E-mail newsletter@investica.co.uk

Full details of our services are available at www.investica.co.uk E-mail  info@investica.co.uk

This E-mail contains free information which is available for distribution provided recognition is given to Investica Ltd.  If you would prefer not to receive future E-mails, please E-mail admin@investica.co.uk with 'unsubscribe' as the subject.

Disclaimer: Investica's market analysis is not investment advice and must not be taken as recommending particular market positions. Investica can take no responsibility for any actions taken by investors.

Inclusion of this comment in a Website does not indicate that the Website or company is endorsed or recommended by Investica Ltd.