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At the same time, the minutes of the previous BoE meeting left all options open for the November meeting. The report openly mentioned differences in views between members on the outlook and the likelihood that further easing in policy would be required. The report also repeated recent quotes from BoE’s King that there were limits to what monetary policy could be expected to achieve. Markets had apparently hoped for a less neutral/more pro-easing tone from the MPC. EUR/GBP lost 15/20 ticks after the release of the minutes. However, this road was also blocked and EUR/GBP kept a perfect sideways trading pattern further out in the session. EUR/GBP closed the session at 0.8124.
Later today, markets will look out for the UK retail sales. Economists expect a rebound after the decline in August. After the yesterday’s ‘neutral’ tone in the Minutes of the October meeting, there might be some market nervousness in case of a strong report. We still assume that the BoE will raise the amount of asset purchases in November, but some uncertainty might creep into the market in case of more good eco data. This might support sterling, in the first place against the dollar, but also gains the euro.
As is the case for EUR/USD, high profile news from the EU summit remains a wildcard for EUR/GBP trading. A new rally developed, but until Tuesday it failed to take out the 0.8114 top. This happened after the Moody’s decision to keep Spain in the investment grade category. The 0.8169 range is now coming in the picture. The MT picture in this cross rate remains constructive. That said, the pair had a good run of late and is moving into overbought territory.
Remember prior EU Summits and the amount of newsflow and rumors. Many of these Ministers like to see their names in print and want to push their own agendas, so the comments and interviews may not always be the same as the reality or the outcome of the Summit. Sit tight it should be a bumpy ride over the next 48 hours.