Big Day For The Pound Tomorrow

The release of the minutes from the Bank of England's October meeting tomorrow may be a defining moment for the pound.

Sterling has jumped by around 7 cents against the dollar and from 1.070 to 1.0950 against the euro since the early part of last week, largely on comments from MPC member Paul Fisher that QE was working.

Tomorrows minutes will cast some light on whether this is the general consensus amongst the MPC policymakers. Especially in the light of another member of the committee being quoted over the weekend as saying that the BoE should continue it's QE measures as the financial system is still not fully recovered.

Last month's minutes revealed that the MPC did not rule out expanding QE somewhere further down the road to recovery. Yesterday they said that "it is possible that sterling's depreciation may be part of a more prolonged process of rebalancing of the UK economy, generating a fall in the long-run sustainable real exchange rate."

Both statements appear to suggest that the recent recovery in sterling may only be temporary.

Meanwhile, news out today reveals that public-sector borrowing in the UK increased to GBP14.8 billion in September (from a revised reading of GBP14.7 billion in the previous month) marks the biggest deficit since record keeping began in 1993. Additionally, public sector net cash requirement rose to a 25-year high of GBP19.4 billion during the same period.