The pound gained against the dollar during the overnight trade ahead of the Bank of England’s interest rate announcement scheduled for today at 12:00. The Monetary Policy Committee is expected to leave the benchmark interest rate at 0.5% and the quantitative easing program unchanged at 200 billion pounds. The main focus for the policymakers is to make sure that the economy can withstand the government’s fiscal austerity plans, and that the private sector activity can offset the contraction in public sector and increase in interest rates. Minutes of the decision, which will show if any officials joined Andrew Sentence, Martin Weale and Spencer Dale in calling for the a rate increase, will be published on April 20. Expect for the pound to remain under pressure against the euro as the European Central Bank is expected to tighten its monetary policy at today’s meeting.
The euro consolidated against the dollar during the overnight trade after Portugal’s government requested for the economic aid, highlighting the divergence in the region as the ECB prepares to raise interest rates. Portugal’s PM Jose Socrates said yesterday that his nation was seeking for financial assistance. Analysts expect that the rescue for Portugal may be worth as much as 75 billion euros. On the other hand, the European Central Bank is anticipated to increase its main rate by 25 basis points to 1.25% at today’s meeting. Many traders believe that the ECB will increase its base rate to 1.75% by year-end, boosting the single currency’s prospects.