• Would be surprised if Uk returned to recession, but recovery will be bumpy, fragile

Cable little easier on that, presently at 1.5135.

• Timing of stimulus withdrawal will be difficult decision, guided by inflation outlook
• Range of evidence that QE having desired impact, but still long way to go
• Much of impact of QE purchases yet to feed through, we’ll know more over coming year
• Tentative signs that nominal spending in economy is starting to accelerate
• When time comes policy could be tightened by rate hikes, asset sales in any order

Cable has built on earlier gains. It’s been up to session high 1.5170 so far, presently at 1.5155.

MPC’s Dale is scheduled to give speech at 11:00 GMT.

To 2.5% in February from 2.4% in November 2009, according to Bank of England survey.

Cable extending rally to 1.5000 at writing. As mentioned earlier those US custodials can be lumpy.

Meanwhile UK clearer reportedly selling the EUR/GBP cross, which is down slightly at .9100. Funnily enough there were reports yesterday of a different clearer selling the cross around same levels (ie .9110/20). Both these clearers are different from the UK clearer said to have been recently buying 6month 1.4400 cable puts. Which would kinda make sense I guess.

Comments made by BOE policy maker Adam Posen hit the wires last night but Reuters is rerunning them, giving cable a lift. QE is probably done, Posen says.

BOE MPC member Kate Barker says the recovery is on track but that path is set to be bumpy. Severe risks to the downside have diminished she said.

The MPC is having a tough time reconciling the recent uptick inflation with the still-big output gap, she said.

Weakness in the world economy is a worry, especially in the EU, she noted.

Cable is a tad firmer in the wake of the comments which suggest the worst is past for the UK economy. It trades now at 1.5070 from 1.5032 lows.

I kinda like BarCap’s stuff. Seem pretty switched on to me, and they have a solid reputation.

They see UK rates, QE on hold, and think it unlikely we’ll see any change ahead of the general election.

Brighter than expected data from Britain’s dominant services sector has helped ease fears economy may have slipped back into recession in the first quarter.

The overwhelming consensus in the market is that the MPC will keep UK rates unchanged and that there will be no change in policy despite the rollercoaster that sterling is currently on.

I don’t know whether any of you remember the bad old days with Nigel Lawson (he’d have been better off becoming a chef like his daughter!!) when he raised and lowered rates all on the same day. Cable rallied 500 pips, fell 800, and finished the session more or less unchanged to the pip. All it cost was about a bucket of sweat.

A sign of panic from the BOE? They just announced they will launch a 3-year bond denominated in dollars next week.

Why dollars?

Some will surmise they can’t issue in pounds. That’s nonsense. Perhaps they think sterling is cheap and want to issue in dollars so they can pay them back with cheaper dollars down the road…

Either way, the pound is being hit on the news, now at 1.4910.

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