The Bank of England didn’t go to the printing presses. The Pound that lagged behind reacted with a jump, finally moving above 1.60, but is still vulnerable. No statement was issued. Update.
Adam Posen’s talk about more quantitative easing – more pound printing, hurt the Pound in the past week. While there were doubts if his words were only an attempt to hurt sterling in the ongoing currency war, this did leave the Pound behind.
The bank decided to leave the QE program unchanged at 200 billion pounds. The relief after this statement sent GBP/USD higher. GBP/USD is now trading above 1.6010, the highest level in two months. Earlier this week, the Pound struggled between 1.57 and 1.5940.
Mervyn King and his colleagues are probably more divided than ever. Before this decision, there was already talk of a three-way split within the Monetary Policy Committee. Andrew Sentance wants a rate hike to fight inflation, Adam Posen wants more QE, while King and the rest are in a “wait and see mode”.
Indeed,decision was as expected – wait and see. The surprise came from the fact that no statement was issued – this isn’t common, and shows that the 9 members couldn’t agree on a forward looking statement. This makes the release of the meeting minutes very interesting.
The next levels above are 1.6080 an 1.6270. Below, 1.5820 and 1.5720.
Earlier today, the Halifax HPI showed that home prices plunged by 3.6%, quite a shocker. Expectations were for a rise. This big drop shows that the economy is very vulnerable, and so is the currency.
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