London Session - October 21, 2009 6:19 AM

Sterling has managed significant gains this morning on the back of more optimistic comments from the BoE. Cable ratcheted gains up to 1.6589 before meeting resistance; EUR/GBP is back below 0.9025. In his speech in Scotland last night Governor King remarked that “recent months have brought better news” and suggested that in the second half of this year the UK economy will return to positive growth. This speech was followed by an article for The Herald newspaper which reportedly suggested that at some point rates would go higher. This is another statement of the obvious, nevertheless, on top of the less pessimistic tone of King’s speech this was taken as a signal that the BoE could becoming less dovish. This morning’s releases of the minutes of the October MPC also reflected a more upbeat tone with respect to the UK economic outlook. That said, uncertainty over the robustness of the economic outlook was clear in both King’s speech and in the minutes and the latter also confirmed that there were differences of views on the inflation outlook suggesting that an extension to QE is still possible next month. This morning’s CBI Industrial trends data brought fresh support to sterling late in the morning. Survey data has suggested that tomorrow’s Sep retail sales data could also be strong (median +0.5% m/m). However, another disappointment in Friday’s Q3 GDP release could undermine sterling’s newly found confidence. Full text »