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GBP/USD Loses Support on Dovish Meeting Minutes

GBP/USD loses support and and is testing lower ground.  This comes after the meeting minutes of the latest rate decision in Britain were quite dovish.

While only one member voted for expanding the QE program right now, this option was seriously discussed by other members as well. Adam Posen might not remain alone next month. When will QE2 in Britain be realized?

At 1.5625, the pound is at a new 8 month low. It was last seen on January 12th 2011. The moves continues.

Until quite recently, an option of a rate hike was still on the cards, due to high British inflation. Inflation remains elevated, around 4.5%, but the overall situation is worsening. British unemployment is rising too fast.

So, after two members stopped voting for a hike, no one joins Posen in supporting more QE, but is definitely an option. Pressure also comes from the government. Chancellor of the Exchequer George Osborne said that the government’s moves “pave the way” for actions by the BOE.

Towards the release, the pound/dollar was moving lower towards support at 1.5650. GBP/USD fell lower, with a Sunday gap and couldn’t close this gap, around the resistance line of 1.5780. The pair fell as low as 1.5632 but returned above support at 1.5650 quite quickly.

Further support is at 1.5550. Resistance is at 1.5780, followed by 1.5820. For more on the pound, see the GBP/USD forecast.

At the same time, another figure was released in Britain:  Public Sector Net Borrowing rose to 13.2 billion, higher than 11.3 billion that was expected. This means a higher deficit and more weight on the pound. This just adds fuel to the fire.

Addition: The committee also pondered on lower rates and Operation Twist in Britain:

The Committee also discussed a range of other possible policy options including:  changing the maturity of the portfolio of assets held in the Asset Purchase Facility; revisiting the earlier decision not to lower Bank Rate below 0.5%; and providing explicit guidance about the likely future path of Bank Rate beyond the information about the Committee’s judgement of the medium-term outlook for inflation contained in the Inflation Report and the MPC minutes.

Operation Twist sounds like the Fed. The FOMC will release its highly anticipated statement today. See the FOMC Preview for all the details.

It seems that only a large variety of moves will weaken the dollar.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.