Sterling drops following BoE minutes

The pound is weaker versus the US dollar following this morning’s update from the Bank of England.

The pound is trading at $1.5622, down 0.1% after it was revealed that the Bank of England is divided over what size stimulus package should be in place. Six of the nine MPC members are in favour of keeping the bond-buying scheme unchanged, while three would like to increase the programme.

One of the members in favour of expanding the package is Sir Mervyn King, the outgoing Bank governor, whose attitude highlights that some members feel the UK economy isn’t yet strong enough. If the UK reveals more weaker-than-expected economic indicators, we may see more members calling for additional stimulus, which may weaken the pound.

Tonight, the US Federal Reserve will announce its heavily anticipated update on the US economy. Some economists are expecting the Fed to keep its stimulus package unchanged for now, but that they may drop hints about tapering back in the months to come. If the US central bank does give any indications over reducing its bond-buying scheme in the future, we could see dealers sell the pound and buy the US dollar.

Spot FX GBP/USD chart

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