Pound Dips In Subdued Trade

 | Jul 14, 2014 12:31PM ET

GBP/USD has posted losses on Monday, as the pair has dipped below the 1.71 line. It's a quiet start to the week, as there are no releases out of the UK or the US to start off the week.

As widely expected, the BOE maintained its monetary course last week, making no changes to interest rate levels or its asset purchase scheme. The benchmark interest rate remains at 0.50%, while QE continues to be pegged at 375 billion pounds. With talk of a rate increase possibly before the end of the year, the markets will be interested in the voting breakdown in the interest rate decision, which will be published next week. If a minority of MPC members voted to increase rate levels, we could see some upward movement from the pound.

In the US, employment data continues to impress. Last week, Unemployment Claims dropped to 304 thousand, well below the estimate of 316 thousand. Employment numbers for June looked sharp, led by a jump in Nonfarm Payrolls and a drop in the unemployment rate. The strong employment numbers have increased speculation about an interest rate hike by the Federal Reserve, and remarks by Fed policymakers will be closely scrutinized as the markets look for clues as to the timing of any rate moves.

The Federal Reserve minutes did not shed much light on when the Fed plans to raise interest rates, but policymakers did agree to wind up the QE scheme by October. The asset purchase program flooded the economy with over $2 trillion, and the Fed has been steadily reducing the program since last December. Winding down QE, which currently stands at $45 billion/month, will require several more tapers by the Fed, but that shouldn't pose a problem, given the solid employment data the economy has been churning out.