Pound still being held back by threat of more QE

Good Morning. Sterling rose against the Euro yesterday, but wiped out earlier gains against the dollar, after surprisingly weak US consumer confidence data pulled investors toward the liquidity and perceived safety of the US Dollar. Rates @ 08:30am are as follows:

  • GBP/EUR 1.1035
  • GBP/USD 1.6352
  • GBP/AUD 1.7972
  • GBP/NZD 2.2138
  • GBP/CAD 1.7482
  • GBP/CHF 1.6691
  • GBP/JPY 149.03
  • GBP/ZAR 12.611
  • EUR/USD 1.4810

Shock news last week that the UK economy contracted again in the third quarter is still the main driver for the pound at the moment, and prompted investors to acknowledge it is too early for the Bank of England to remove its stimulus, and that quantitative easing may be extended as soon as next month.

Attention is already turning toward the BoE’s Monetary Policy Committee meeting next week and whether its 175 billion pound QE programme will be expanded. Friday’s dismal GDP data had clipped a 2 week rally in the pound, which had recovered from a seven-month low against the euro after some upbeat data and comments from BoE policymakers instilled a degree of hope about a recovery in the UK economy.

George Buckley, Deutsche Bank’s UK economist, on Monday changed his forecast and said the BoE would likely expand QE by an additional 50 billion pounds, and Barclays Capital revised down their sterling forecasts the next several months out.

The recent rise of the pound in the last few days is really just investors repositioning their trades, and the pound is still being held back by the threat of more QE from the BoE.

Todays Data
US – Consumer Confidence
Jap – Retail Sales
UK – CBI Survey

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