British Pound Sterling on Wed 18 Sept: GBP Bullish Outlook Cemented as First Big Central Bank Hurdle is Vanquished

The British Pound Sterling (Currency:GBP) is in robust form ahead of the key release of the Bank of England Minutes at 09:30. The big event for currency markets however came when the US Fed decided against scaling back their asset buying programme. The dollar tanked, gold shot higher and equity markets have also taken a boost. Commodity currencies like the AUD and NZD have also enjoyed gains.

The latest British pound exchange rates, as of the last update:

• The pound converts into 1.1926 euro; the exchange rate is 0.17 pct HIGHER than seen at last night's close.
• The pound converts into 1.6097 US Dollars; the exchange rate is 1.21 pct  Higher.
• The pound converts into 1.7087 Australian Dollars; 0.18 pct lower.
• The pound converts into 1.9280 New Zealand Dollars, 0.17 pct lower.

BE AWARE: These are wholesale quotes. Your bank or provider will add their own discretionary rate when passing on retail FX. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here.

20:30: GBP surges against a fatally wounded US Dollar

The US Fed has delivered a heavy blow to the US Dollar.

GBP/USD is a whopping 1.24 pct higher at 1.6100.

A surprising “no-tapering” announcement from the US Federal Reserve’s Open Market Committee was delivered this evening.

A majority of analysts and market watchers had predicted the Fed would Wednesday would lay out the specific timing of a scaling back of its $85 billion-a-month bond-buying program. More here.

16:03: Sterling could come under pressure tonight

Sean Lee at FXWW expresses concern that the Pound Sterling could come under pressure against the US Dollar, but not the euro, tonight:

"This pair (GBP/USD) can now rally 300 pips straight north as I’m booking 1/2 my profit at 1.5910. I simply don’t want to have any type of a large position heading into the Fed.

"I’m still running an intraday short position in USD/JPY but I have a very tight stop on that and will certainly cut it before the event. My only other trade is short EUR/GBP, but that’s a longer-term play which shouldn’t be affected by the Fed decision."

16:00: For FOMC, GBP could be best currency to play against US Dollar

Matt Weller at GFT:

"Unlike the rest of the major currency pairs, the GBP/USD is actually seeing a bit of volatility over ahead of the Fed’s marquee decision. Today’s BOE minutes revealed a unanimous vote to keep the bank’s quantitative easing program unchanged, suggesting that bank members believe the UK economy will not need any additional stimulus.

"From a technical  standpoint, the pair just put in a Bullish Marubozu Candle on the 4hr chart, showing strong buying pressure as rates rallied to a new 8-month high. In the short-term, the rally may peter out ahead of the Federal Reserve decision, but if the Fed fails to taper, the pound may represent the best currency pair to play against the U.S. Dollar."

14:51: Outlook for GBP against CAD

Shaun Osborne gives the latest technical forecast for the Pound vs Canadian Dollar:

"GBP/CAD continues to flash some mixed signals. The GBP recovered some of yesterday’s intraday weakness and closed back above the bull pennant ceiling. Gains today suggest the potential for a marginal new cycle high on a close basis.

"The set up here remains GBP-constructive, on the face of it. But the waffle around the break out and the fact that the litmus test for us—a clear move through the range highs in place since 2010—has still to be passed suggests that caution remains warranted."

For a full Canadian Dollar report please see here.

14:02: Sterling strong, currency markets calm ahead of FOMC storm

The British Pound Sterling is without doubt the only real source of excitement on the markets today.

Expect it all to kick off at 19:00 tonight though.

Peter Rosenstreich at Swissquote says:

"We are only a few hours away from the Fed's QE decision announcement and the Bernanke press conference. The broad market view on today's Fed meeting is beginning to solidify. Gauging the reaction in the rate market, there is are general expectations that Bernanke will deliver a gentle cut to asset purchases of between $10bn to $15bn and restrained (dovish) tone in the accompanying press conference.

"With the Fed missing its inflation and growth targets, it’s hard to see members voting for anything but a watered down first move. It seems unlikely that Bernanke will give the markets anything more aggressive, within his press conference, Chairman Bernanke should rigorously stress that interest rates will continue to be anchored well beyond asset purchase program ends (short-term rates near zero for an extended period)."

13:18: No reason why GBP/USD can't test 1.6

Stephern Gallo at BMO Capital Markes:

"The GBP and the UK curve were where the bulk of the attention was focused this morning in London, following on from the release of the BoE’s September MPC meeting minutes.  

"Even with some retail or corporate GBP offers taken into account, there is really no reason why GBP/USD shouldn’t be able to test the 1.6000 level before the FOMC.  

"Given our forward outlook, we’re already starting to think about viable entry points for a short cable position over the balance of 2013, but the near-term price dynamic in the pair (not to mention the potential ranges to open a short GBP/USD position) will obviously be heavily shaped by the Fed tonight.  We still see GBP/USD ending the year lower than the 1.5800-1.6250 range."

12:50: Bank of England turns focus to Sterling strength

Stephen Gallo at BMO Capital Markets points out that the Bank of England have today indicated a willingness to focus on the value of Sterling:

"One important spotlight within the MPC minutes was the mention of the level of sterling in the context of the 18-24 month window which is relevant to the BoE’s CPI forecast knock-out.

"The net takeaway here is that the GBP is probably becoming more important for the Committee as one important policy input.  If so, it suggests that the mentality at the Bank has shifted tremendously away from Mervyn King’s style of “benign neglect”.

The Bank said: “The 4% increase in the sterling price of oil would be likely to raise the near-term profile for inflation; while the appreciation of sterling, if sustained, would bear down on inflation further out, including in the 18-24 months ahead range pertinent for the forward guidance knockout.”

11:11: It remains to be seen whether Sterling can hit 1.6 against the US Dollar

Boris Schlossberg on today's trade in Sterling / Dollar:

"The disconnect between the accommodative rhetoric and the better than expected growth has put the credibility of the central bank into question. Today's 0-9 vote on QE may have been a tacit acknowledgement by the MPC that condition on the ground in UK are better than their initial forecast.

"Whether cable is able to hit 1.6000 later today depends in large part on the actions of the FOMC."

For more views on the FOMC and US Dollar, read our latest report on GBP/USD here.

11:01: GDP forecast revised higher by Bank of England

The BoE revised its expectation for growth in the third quarter from its 0.5 per cent estimate, made in the August inflation report, to 0.7 per cent.

10:10: Reactions to MPC Minutes

The Bank of England MPC voted unanimously in favour of keeping QE and bank rate unchanged. The Bank also said that a continued rapid house price increases was a concern, and upside risks to MPC growth forecasts had increased sine  August.

"Gilt yields also higher after the BOE minutes. BOE noted the upward movement in UK rate expectations, but took no action. The trouble with forward guidance: you must be firm. If growth indicators stay strong BOE may abandon policy and deal with credibility" - Forex.com.

"GBPUSD hits fresh 8-month highs after BoE minutes" - Investing.com.

"EUR/GBP alert! EUR/GBP has dropped more than 0.3% in the last hour, from 0.8391 to 0.8365" - EasyForex.

09:31: GBP surges on Bank of England MPC minutes release

Bank of England Minutes Released.

MPC 9-0 voted to  keep rates and  stimulus steady.

"Tentative signs spare capacity may be beginning to fade" - a bullish, pro-sterling assessment.

Look at the reaction of the GBP/EUR:

08:37: Outlook for pound sterling remains solid

Emmanuel Ng says Sterling should remain well supported:

"Cooler than expected UK inflation numbers and a weak dollar environment saw the GBP-USD ending relatively flat on Tuesday.

"Look to BOE MPC minutes (look for clues on discussion surrounding the forward guidance as well as odds for further monetary easing) ahead of the FOMC later in the global day with the pair still seen supported on dips.

"Expect consolidation to kick in around 1.5965 while an initial floor may be expected towards 1.5870."

08:25: US Dollar weakness persists as traders remain cautious ahead of tonights FOMC event

The British Pound Sterling remains on the front foot against the US currency on Wednesday morning, and will likely do so for much of the day.

Emman Xuereb at RTFX says:

"The Bloomberg Dollar Index stayed close to a five-week low, as forex investors refrained from pushing it either way given the remaining uncertainty surrounding the decision.
"The Fed will conclude its two-day FOMC meeting today and is expected to announce the pace of its monthly asset purchases.

"Whilst only a few weeks ago it looked certain that US policymakers will start scaling back on its monetary stimulus, recent downbeat economic data from the world’s largest economy, more importantly the disappointing non-farm payrolls report on September 6th have cooled expectations on the size of the pullback."

Lloyds Bank Research say they believe the FOMC will announce the start of withdrawal of stimulus, a US Dollar positive:

"The Fed is widely expected to announce the start of a scaling back of its policy stimulus. Recent data has increased the uncertainty of the outcome, but we doubt it will prove sufficient is enough to sway the FOMC’s decision."

08:22: What do look out for in Bank of England MPC Minutes

Lloyds Bank Research on Sterling's main hurdle today:

"Given the Bank of England’s forward guidance, there will only be passing interest in the minutes to September’s MPC meeting. Indeed, today’s FPC meeting is of more interest, although the details of the outcome will not be published until September 26th.

"It seems that for now at least the need for further monetary stimulus, on top of forward guidance, has diminished. We will watch for signs that members are surprised by the recent strength of indicators and any implications for their unemployment projections, including any divergence from the central case that unemployment will remain above 7% until at least 2016.  Votes on policy are likely to have been unanimous."