Sterling hit a one-month low against the Euro and fell below 1.53 against the Dollar Wednesday morning following the release of this month’s minutes from the Bank of England’s policy meeting. There was a unanimous vote to keep interest rates at 0.5% and the three same members including the current Governor voted for an increase in quantitative easing of £25bn, as at the previous two meetings. Whilst there’s been no increase in votes for quantitative easing, the language around inflation has changed and this could be what’s caused Sterling to weaken as expectations increase for further easing. Last month, some members of the MPC highlighted concerns about the risk of more Q.E. causing Sterling to weaken and how that could bring about an increase in consumer price inflation, already closer to 3% than 2%. At this meeting there was no mention of the currency impact or more Q.E. and they said that they should look past even protracted higher levels of inflation. This certainly doesn’t make more asset purchases a given but seems to lend itself to a further increase in the coming months. Sterling has recovered from its lowest levels against the Dollar and the Euro in the last few week but is still lower by nearly 6% from where it started the year at. Many major banks are still forecasting Sterling to weaken a lot by the end of this year and a large contributor to those forecasts will be expectations of more monetary easing. Today’s minutes will no doubt reinforce those forecasts in combination with the lack of growth expected in the economy as highlighted by the IMF yesterday. Like the weather seen so far, perhaps this isn’t going to be a great year for our currency either!

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