EU Morning Report - BoE boosts sterling, QE bets wane

Bank of England (BoE) slashed the nation’s Gross Domestic Product (GDP) forecast in its Inflation Report released yesterday. The central bank’s Governor King pointed out that the asset purchases program effect is not losing ground, something that analysts view as a hint for additional quantitative easing in November. Federal Reserve Bank of Dallas President Richard Fisher said that the Fed has “done enough”; one day after Boston President Rosengren noted that there is a limit to Fed’s balance sheet. Market participants are speculating on whether these comments wane the probability of a third round of quantitative easing.

§ The euro (EUR) dropped by 1.0% against the Norwegian krone (NOK) and by 0.8% versus the Swedish krona (SEK) as real-money investors moves their funds to the safe haven economies of Scandinavia.

§ The New Zealand dollar (NZD) dropped from 0.8146 to 0.8116 against the US dollar, as the unemployment rate rose by 0.1% to 6.8%. The Australian dollar (AUD) strengthened overnight, as the unemployment rate dropped to 5.2% from 5.3%.

§ The US dollar (USD) dropped from 78.61 to 78.41 against the Japanese yen (JPY). Late in the Asian session, Bank of Japan (BoJ) left its lending rate unchanged and did not suggest additional stimulus.

§ Gold (XAU) rose from 1610.63 to 1612.09 US dollars a barrel but failed to break through its recent negative trend line.

§ The UK 100 (FTS) advanced from 5818.5 to 5851.8, a 0.4% daily rise, on the back of BoE’s inflation report.

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