King remarks propel pound

STERLING surged to one-month highs against both the US dollar and the euro yesterday as traders saw an extension of quantitative easing (QE) as less likely following the publication of the Bank of England minutes.<br /><br />The pound hit $1.6636 and the euro slid more than 1.2 per cent on the day to 89.98p, as a better recovery for the UK economy was priced in.<br /><br />The speech given by Bank of England governor Mervyn King in Edinburgh on Tuesday night was upbeat about the prospects for the UK recovery, which also helped propel the pound higher during yesterday&rsquo;s trading session.<br /><br />Mark O&rsquo; Sullivan, dealing director at foreign exchange provider Currencies Direct, said: &ldquo;Following King&rsquo;s speech overnight, sterling rallied across the board in early morning trading, albeit from extremely oversold conditions.&rdquo;<br /><br />But he added: &ldquo;It&rsquo;s important not to throw caution to the wind. With the November inflation report still to come, we can&rsquo;t safely say we have seen the last of any increase in the QE program.&rdquo;<br /><br />Both King&rsquo;s speech and the MPC minutes have helped sterling this week regain some of its recent losses, which saw the pound hit multi-month lows against both the greenback and the euro. <br /><br />Since last Monday, the pound has surged nearly five percent against the dollar, while the euro has tumbled almost three per cent.<br /><br />But the weak pound has played an important role in improving UK exporters&rsquo;s competitiveness and offsetting some of the impact of the recession.<br /><br />Struggling UK manufacturers will be keen to see sterling stay relatively week over the coming months to ensure overseas demand continues to stay strong.<br />P15: mpc Minutes