Sterling up on BoE’s quantitative easing decision

Sterling up on BoE’s quantitative easing decision

11-06-2009 10:09

The central bank of the United Kingdom decided to enlarge the Asset Purchase Facility to £25 billion, while £50 billion was forecasted. The Pound Sterling is favored by positive data this week, while less Pound issuing is better for the British currency.
The Bank of England left the interest rates unchanged at the record low of 0.5%, while an increase is not expected.

MPC not eager

Mervyn King’s Monetary Policy Committee (MPC) isn’t eager to issue more Pounds. Yet in August, the Governor of the Bank of England wanted to extend the quantitative easing program by £200 billion, but this wasn’t approved. The Bank of England now wants to enlarge the program since it has run out.

Quantitative easing decision

Economists expected that the BoE would extend the quantitative easing program by £50 billion due to the negative gross domestic product that proved the enduring economic slump. The smaller than expected expansion has a positive effect on the Sterling. The GBP/ USD pair traded approximately 100 pips higher than before the BoE decision.

Sterling up

There was an affect on the Forex trading market. The Sterling profits from this week’s positive data, as manufacturing PMI surpassed the important level of 50 last Monday, and beat estimations considerably. Figures regarding the services PMI also exceeded estimations as it climbed to 56.9 points, which is a rather exceptional level.

House prices

The prices of residential housing also climbed, as the Halifax HPI inflated 1.2%, which is considerably more than the forecasted 0.8%. Today’s figures demonstrated that manufacturing production rose 1.7%, climbing beyond expectations, in contrast to last month’s decline.

Modest decrease

The GBP/ USD pair rose to 1.66 before the release, boosted by yesterday’s hopes that the US rate decision would turn out positive. The Federal Open Market Committee statement decreased the gains modestly, and resulted in the GBP/ USD pair trading approximately at 1.65 ahead of the BoE rate decision.