STOCK MARKET WATCH - Thursday, 22 March 2012

[Ghost Dog]

71. Sterling drops as weak data fuels QE speculation

...Minutes from the BoE Monetary Policy Committee meeting released Wednesday showed a surprisingly dovish slant as rate-setters Adam Posen and David Miles pushed for more asset-buying quantitative easing to try to stimulate the economy.

"With consumer spending staying sluggish, government spending contracting and firms reluctant to invest our sub-consensus GDP view for 2012 still holds with the prospect of further QE from the Bank of England remaining in place," said James Knightley, UK economist at ING.

But the BoE faces a difficult balancing act after Wednesday's minutes also showed concerns over elevated oil prices and potential wage pressures which could make the case for additional easing harder to justify.

Market players said although the case for more asset purchases was still up for debate, further weak data in the next few months could pave the way for the MPC to sanction a fresh injection of liquidity in May to coincide with the next quarterly inflation report...

...However a strict programme of austerity is likely to weigh on growth and keep investors cautious on the pound.

/... http://uk.reuters.com/article/2012/03/22/markets-sterling-close-idUKL6E8EMAIH20120322?rpc=401&feedType=RSS&feedName=ukPoundRpt&rpc=401