Sterling falls on possible extension of asset-purchase program

10-14-2009 13:19

The Pound Sterling continues to lose against the majority of the most-popular currencies in the Forex market on the back of expectations that the Bank of England could prolong its asset-purchase program to boost the UK’s economy devalued attractiveness of the British currency.

Extension asset-purchase program

Expectations became stronger that the national central bank will in the end have to prolong its asset-purchase program as today’s data proved that inflation in Britain fell to the weakest rate in 5 years. Exceptionally low inflation or deflation rates characterize a recession, which has been a major problem for the UK economy since the beginning of the financial crisis last year. Earlier, the British Central Bank had confirmed that the current stimulus package would not be extended. However, investors have their doubts as the economic situation in the UK becomes worse and it is expected that policy makers will take measures in order to improve the country’s economy.

Disastrous for Sterling

The outlook for the Pound is exceptionally pessimistic, given the fact that the foreign-exchange markets offer currencies that are more attractive. John Ross Crooks Jr., Black Swan Capital President and Chief Trading Officer, said: “Fundamentally, better growth perspectives in other parts of the globe, in combination with low returns for the projected future is disastrous for the Sterling.”
The British currency is expected to continue its pessimistic pattern in the near future, unless the attractiveness of the Sterling increases as a result of a significant change in global and domestic situation.