The Bank of England is dominating the news once again following the release of its minutes from the August 6th meeting.
The Bank of England is dominating the news once again following the release of its minutes from the August 6th meeting. If you recall, at this meeting the BoE voted to expand its quantitative easing program. At the time this news came as a surprise as the majority of analysts surveyed had not expected an expansion. Since this news was released, the GBP USD has topped and started a down trend.
Traders have been selling the British Pound since early this morning following news that three out of nine members of the Bank of England’s Monetary Policy Committee argued to increase the asset buy-back funding to as much as $329 billion. Although this proposal was shot down by the majority, it is an indication that all BoE members are not on the same page when it comes to reviving the economy.
The weakness in the Chinese stock market overnight is once again igniting a flight out of higher yielding currencies into the lower-yielding U.S. Dollar and Japanese Yen.
The EUR USD is under pressure because of less demand for higher risk assets. Lower equity and energy prices are also pressuring the Canadian Dollar. Higher yielding currencies such as the AUD USD and NZD USD are also reeling from the weakness in the Chinese stock market.
Economic problems in China continue to mount as traders begin to succumb to the possibility of less liquidity to fuel Chinese demand for equities and commodities. Not only are higher yielding currencies falling because of lower equity prices, but concerns are building about a huge cut back in Chinese imports. This is providing additional pressure on countries which rely on exports such as Australia, New Zealand and Canada.