Jobs, Not Inflation, Will Drive U.K. Rates
NEW YORK (TheStreet) -- Against the dollar, the pound is trading at its highest levels in eight months. Recent rallies have been driven by minutes from the September meeting at the Bank of England, where policymakers voted 9-0 decision to keep stimulus programs on hold.
This is a significant difference from what was seen during the August meeting, when a dissenting minority saw a "compelling" need for policy changes that were more accommodative.
This is also an implicit suggestion that the BOE is confident that improving macroeconomic data indicate a sustainable trend.
The reduced potential for additional monetary stimulus has pushed the pound to gains of nearly 7% since the end first quarter, which is one of the best performances we have seen this year in developed-market currencies.
Supportive DataTo be sure, economic data largely support the Bank of England's more hawkish stance. The economy in England, the third largest in Europe, is expected to expand 1.3% in 2013 and by 2% next year. This is slightly less than the GDP expectations for the U.S., where expectations rest at 1.6% for this year, and 2.7% for 2014. But England's August Purchasing Managers' Index (PMI) report showed that the service sector grew at its highest rate since 2006.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV