The Bank of England decided to expand the Quantitative Easing program by 25 billion Pounds, less than 50 billion that was expected. Less Pound printing is better for the Pound that enjoys another good figure this week.
British interest rate remained at the historic low of 0.5%. There’s no rate hike in the horizon. No surprise here.
Surprise with Quantitative Easing: Mervyn King’s MPC is cautious with printing more Pounds. He personally wanted to enlarge the program to 200 billion Pounds already in August, but didn’t get enough support.Now that money has run out of the program, the Bank moved forward with this program.
Following the bad GDP that showed ongoing recession made economists think that the expansion of the Asset Purchase Facility by 50 billion. This smaller than expected increase helps the Pound rise. GBP/USD now trades at 1.6600, about 100 pips higher than in the minutes before the release.
The British Pound enjoyed good data during the week: Manufacturing PMI rose above the critical 50 point mark on Monday, and exceeded expectations significantly. Yesterday’s Services PMI was also better than expected, rising to 56.9 points, a level unseen in a long time.
House Prices are also on the rise, with Halifax HPI rising by 1.2%, significantly more than 0.8% that was predicted. And just today, Manufacturing Production posted a neat rise of 1.7% after falling last month, and also exceeding expectations.
Yesterday’s hopes for a positive rate decision in the US also pushed it higher, sending GBP/USD to 1.66 before around the announcement. The “Copy-pasted” FOMC statement (scenario no. 4) slightly eased the gains, and sent GBP/USD to spin around 1.65 before the release of the British rate decision.
Events in Britain aren’t over this week – read the GBP/USD Forecast for more.