GBP/USD Sinks As Two Members Wanted Even More QE

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A larger dose of pound printing was suggested by 2 out of 9 MPC members. Together with unexciting growth forecasts, the meeting minutes were certainly dovish.

GBP/USD lost the 1.58 line it reached prior to the publication, and dipped below 1.57 before stabilizing.

Adam Posen, the permanent dove and also David Miles from the British Monetary Policy Committee, voted against the majority of the committee. They wanted to increase the Asset Purchase Facility by 75 billion pounds. A unanimous vote was expected.

Both dissenters said that: “considerable margin of spare capacity remaining in the economy and the extent of deleveraging still likely to be required”

The rest of the members, including governor Mervyn King, wanted an increase of 50 billion. When this decision came out, the pound ticked higher, as a 75 billion was on the cards.

It will not be surprising to see another expansion from the current 325 billion in the near future. The effect of pound printing has been limited in comparison with the US style QE1 and QE2. Nevertheless, more money in circulation means a devaluation.

In addition, the members saw GDP growth moving in a “zig zag fashion”. The British economy squeezed in Q4 according to the initial estimate. A revised version is due for this Friday.

GBP/USD still has room until last week’s lows around 1.5640. For more on the pound, see the GBP/USD forecast.

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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.