The British pound rallied following the release of the minutes from the Bank of England's last meeting on September 9-10, as it indicated that all of the Monetary Policy Committee members voted to leave policy unchanged, including the dissenters from that August meeting who voted in favor of a larger expansion to their quantitative easing program. At the same time, the former dissenters, including BOE Governor Mervyn King, thought that "a larger asset purchase program could still be justified." Overall, though, the MPC's tone was a bit more optimistic as some indicators have "suggested that growth in the second half of this year was likely to be positive" and "the probability of inflation falling below 1 percent in the coming months had declined since the August Inflation Report," which helps to explains the British pound's broad strength. As we’ve mentioned in the past, though, the UK’s widening fiscal deficits could continue to exert bearish pressures on the British pound in the future as they endanger the nation’s AAA credit rating.
