The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.5370 level and was supported around the US$ 1.4980 level. As expected, Bank of England’s Monetary Policy Committee reduced interest rates by 50bps today to a record low of 1.5% and most economists expect additional monetary easing in February. U.K. interest rates have now declined 3.5% since October but many U.K. lenders have not followed suit meaning market interest rates are not as supportive of the U.K. economy as some policymakers would like. The MPC reported output would likely keep declining sharply in H1 2009 and added banks are unwilling to extend credit because they’re addressing problems on their own balance sheets. Two large U.K. employment agencies, Michael Page and Hays, today warned of deteriorating U.K. market conditions. Chancellor Darling this week intimated he no longer expects a swift economic recovery in H2 2009 but he today killed speculation that quantitative easing measures are imminent in the U.K. Most traders expect the Darling’s March budget will include a significant tax cut and/ or fiscal spending plans by the government. Data released in the U.K. today saw IDS wage details up 3.5% in the three months to November. Cable bids are cited around the US$ 1.3920 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.8890 level and was capped around the ₤0.9060 level.
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