The Poundrebounds against all the majors on speculation that BoE could pause quantitative easing. BoE Markets Director Paul Fisher said that he has more confidence now that quantitative easing is "having the scale and speed of impact that we would have hoped for when we started" in March. He also hinted MPC might opt to pause quantitative easing to give the BOE an option of "doing more later". This is endorsing the comments from Deputy Governor Charles Bean that BoE "will need to gradually remove the monetary stimulus that we have imparted to the economy, otherwise we will be in danger of overshooting our 2 percent inflation target.
The Euro has come under increasing pressure after the September consumer price report showed that inflation has fallen for a fourth month in a row. The 0.3% decline from a year ago in the headline reading was unchanged from August. However the decline from 1.3% to 1.2% in the core component is evidence that deflationary pressure will remain. Despite expectations of a 0.1% increase during the month prices were flat despite and were offset by declines in energy and housing markets. The ECB stated in their monthly bulletin that they expected low inflationary pressure over the medium term.
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