THURSDAY, 08 JULY 2010 12:03 The biggest piece of news for the British Pound was to be the Bank of England announcement. The Pound Dollar exchange rate is 0.480% lower on the hour with 1 GBP = 1.5131 USD at 12 PM in London. The Pound Euro exchange rate is 0.465% lower with 1 GBP = 1.1961 EUR. The Euro Dollar exchange rate is 0.016% lower with 1 EUR = 1.2650 USD. The Bank of England provided few shocks to the forex market today, leaving the interest rate unchanged at 0.5%. Exchange rates have failed to break those trends being witnessed prior to the announcement. They also held the level of quantitative easing at £200 billion. "With the impact of severe spending cuts and tax hikes due to be felt over the coming months, the Bank will be looking to keep monetary policy as loose as possible for the immediate future. At present, even the earliest forecasts for a rate rise are not until the first quarter of 2011. A rise in interest rates at this point could quickly put a stranglehold on the economic recovery. Duncan Higgins, senior analyst at Caxton FX comments: “The Bank’s announcement passed relatively unnoticed this month. However, the minutes which are due in two weeks will be of particular interest following Monetary Policy Committee Member Andrew Sentance’s surprise vote last month. Sentance considered the rising level of inflation enough of a threat to warrant an immediate rise in interest rates. It will be interesting to see if he has repeated his vote, and perhaps more importantly if any other members have been persuaded across to his camp.” “It still seems unlikely that rates will shift this year, the threat to the recovery is too pressing. However, as inflationary pressures build, the market will speculate and further dissent from MPC members could give sterling a boost,” continues Higgins. Pound exchange rates have been on the back foot again today, falling back below 1.20 against the euro. Duncan Higgins concludes: “The Bank’s announcement has failed to slow sterling’s decline. The euro is currently finding some support on the hope that the results of the European stress tests may ease concerns surrounding the health of the region’s banking system. We expect that ECB President Trichet will have a more confident tone when he speaks in the press conference this afternoon. This could add to the euro’s gains.” At present the British Pound is trading back at €1.1950, with the market anticipating a more positive outlook from the ECB this afternoon. The Pound also lost ground to the dollar today despite rising equity prices, with the price heading down to $1.51.

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