The British pound dropped 0.7 percent against the dollar on expectations of more quantitative easing by the Bank of England. The Monetary Policy Committee (PMC) meeting minutes were published on Wednesday signalling that the central bank is keen expanding its current bond purchase program from the current 375 billion pounds to 400 billion pounds.
The voting suggested that more MPC members in the last BOE policy meeting are in favour of more QE.
Despite the MPC unanimously voting to keep interest unchanged at 0.5 percent, they were split over QE.
6-3 voted in favour of more bond purchases, which included outgoing BOE governor Mervyn King, executive director for markets Paul Fisher and external MPC member David Miles.
Sterling has been falling since last weeks’ BOE quarterly inflation report which had more or less reinforced this view that there would be more QE due to the central bank’s grim outlook on the UK economic recovery.
The BOE had forecast that inflation, currently at 2.7 percent, would not fall below its 2 percent target until early 2016, 18 months later than it predicted in November.
The MPC minutes s caused a sell off in the pound since such QE measures tend to weaken a currency due to flooding the system with money.
GBPUSD plummeted to a new 8-monht low of $1.5315 within 20 minutes of the news at 0930GMT from $1.5435. This is the lowest level since June 3rd 2012.
EURGBP jumped to 87.63 pence from 86.87 pence.