Mid-Day Report: Sterling Pounded By BoE King's Comment

Sterling was knocked down earlier today after BoE Governor King said that the bank is "completely open mind" on extension of the quantitative easing program. King believes the program is "working and the risk of another depression has "sharply diminished". Nevertheless, it "will be a long, hard path back" to a robust economy. Also, King reiterated that "The depreciation of sterling should lead to a recovery in economic activity." Sterling is sharply lower against Euro and dollar after the comments.

In he Quarterly Inflation Report, BoE forecasts for GDP growth and inflation outlook. These estimates were made based on assumptions that the benchmark interest rate, currently at 0.5%, rises to market expectation of 1.1% in 3Q10 and 2.1% at 1Q11, as well as asset purchase program of 200B pound. BOE also anticipated inflation will rise sharply in the near-term and exceed the target level of 2% in 2012.

Also released from UK, unemployment rate was unchanged at 7.8% in September, better than expectation of a rise to 8.0%. Claimant count also rose less than expected by 12.9k in October.

Elsewhere, dollar dips to new low on dovish comments from Fed officials. Dollar Fed Fisher said that inflation is likely to remain subdued for some time and the near-zero interest rates are appropriate. He said growth was likely to be "suboptimal" into 2010 and 2011, with unemployment a "vexing problem." San Francisco Fed Yellen said the prospect of a “jobless recovery” in a speech yesterday. Atlanta Fed Lockhart expects a "relatively subdued" growth pace this quarter and beyond.