Pounded by the King

The British Pound is falling on all fronts. Mervyn King released two Pound-bearish statements that the sent Pound way down, despite better than expected inflation figures. For GBP/USD, 1.6660 is live and kicking after all. Note the sharp falls against currencies as well: EUR/GBP, GBP/CHF and GBP/JPY.

Mervyn King went to the Treasury Committee in  parliament today and released a two negative statements:

• Cutting rates on bank’s reserves, in order to push more money into the economy. Reuters.
• Britain isn’t getting out of the recession so fast, to say the least. NYTimes.

The Pound began diving immediately. GBP/USD fell more than 150 pips, from 1.6650 to under 1.65. Before King’s speech, the Pound traded at 1.6657, the highest for this week. His words later in the testimony about growth in the third quarter were disregarded by the markets.

Note this peak: it’s at the resistance line of 1.6660. The small gains made up to now were capped by the resistance line, and King sent the Pound much lower. The Pound was left behind last week, when other currencies celebrated against the dollar.

Before this release, CPI was better than expected: 1.6% instead of 1.4%. Also RPI (Retail Price Index) did better than expected by falling only by 1.3% instead of a 1.5% drop. Also Core CPI did better than expected. All the numbers are annually adjusted.

Mervyn King definitely sent the Pound down. EUR/GBP is now at new ground of 0.8862,  a three month high. GBP/CHF is at 1.71 (4 month low), and GBP/JPY fell sharply to 150.33.

For more on this week in the Pound, read the British Pound Outlook.