The Pound suffered from a sharp sell off during Wednesday's session on news that the Bank of England held a split view over how much stimulus was required to put the UK economy back on track. MPC members David Miles and Adam Posen voted for a £75Bn injection and therefore failed to come to an agreement with their peers on how much would be needed for sustained future growth.

The news has reopened the debate as to whether there will be additional stimulus in May, the Bank of England will closely watch UK economic progress in the coming weeks and will likely adopt a wait and see approach from here.

The most significant point from the minutes is that not one of the members voted for less than £50Bn, this sends a strong message to the markets that their view on the recovery this year is still for anaemic growth and shows a significant lack confidence. So far the QE total stands at £325Bn, this total is expected to increase to £400Bn by the end of 2012.

News from the recent Greek bail-out has helped Italian and Spanish bond yields fall from record highs. It is clear that there is confidence in the Euro-zone for at least the short term. The 10 year Italian borrowing cost has dropped from 7.1% to 5.4%. The Spanish 10 year yield is down from 6.7% to 5.08%.

We would argue that this confidence within the Euro-zone is temporary and the bail-out is a short term solution. Elsewhere it is clear to see that risk aversion has taken hold in the market with a 1% gain in the value in the USD on safe haven flows. Higher yielding currencies and risk correlated asset classes have also continued to weaken in trade this week despite better than expected date from the Euro-zone and China.

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