The pound is little changed against its major rivals this morning, but remains undermined on speculation the BoE will expand its quantitative easing programme in near future. Bank of England official David Miles signaled today that he may be leaning toward voting for additional asset purchases to support the economic recovery. Economic growth in Britain slowed in the second quarter and recent indicators of consumer confidence, manufacturing and services have all weakened. The central bank bought 200 billion pounds of bonds in a program that ended in the early 2010. Some analyst believe that BoE may resume with its QE programme as early as the October 6 decision, and already speculate with the amount the central bank will inject in the system. Separately, Nat’wide House prices came out slightly better than expected in September, increasing by 0.1% on monthly basis. However, Nationwide reported that recent events in financial markets and the worsening economic outlook are likely to dent buyers sentiment and could depress prices further. Looking ahead to today, lending to individuals and mortgage approvals data for August highlights the economic calendar. The market consensus for mortgage approvals is expected to have risen to 49.7K from 49.2K and net mortgage lending to have been 0.8 billion, up from 0.7 billion in July. Expect for the pound to remain under pressure against its major rivals on increased prospects the central bank will expand financial stimulus.
The euro rose across the board during the overnight trade on speculation German lawmakers will approve the expansion of the bailout fund to help to contain the sovereign debt crisis in the Eurozone. The single currency gained against the dollar as German Chancellor Angela Merkel attempted to win the backing of her coalition to expand the powers of the European Financial Stability Facility(EFSF). The changes on the EFSF would allow the fund to buy bonds of debt stricken member states and offer emergency loans to governments, increasing the Germany’s guaranties to 211 billion euros from 123 billion euros. Expect for the single currency to remain supported on the short to medium term as it looks like the solution to debt troubles in the euro region start to take basic shape.
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