The MPC minutes were broadly neutral for the Sterling. There will continue to be major fears over the government debt position which will limit the scope for Sterling buying with the medium-term outlook still precarious. The currency will also be extremely vulnerable if markets fear that the Bank of England will let inflation rise. Overall, there is still likely to be very strong medium-term Sterling selling interest on rallies to the 1.70 area against the dollar. Short-term it is a sell at 1.6825.

The inflation data reported on Tuesday data should reinforce market expectations that the inflation rate has hit a low point and should also provide some Sterling support on expectations that the Bank of England will have less room for manoeuvre on monetary policy moving into 2010.

Sterling pushed to a high above 1.6850 against the dollar and was also resilient later in the session as the Euro weakened to lows below 0.8850 against Sterling. The UK currency held above 1.68 in early Europe on Wednesday with expectations of a rival bid for Cadburys and investment inflows providing underlying support to Sterling.

The Bank of England minutes recorded a split vote with 1 member voting for a bigger increase in quantitative easing while one other member wanted the amount to be left unchanged. The minutes will not add much to the current debate on interest rates. Sterling dipped initially following the minutes before regaining ground.