Pound Extends Uptrend Against Euro And Franc
Extending yesterday’s uptrend, the pound rose to new multi-day highs against the euro and the franc during early Asian deals on Friday as the Bank of England decided yesterday to continue its asset purchase plan.
The Bank of England kept its quantitative easing target unchanged at 125 billion pounds, surprising markets which had expected the central bank to expand the total by 25 billion pounds, which would have allowed the central bank to pump money into the economy until August, when it publishes new quarterly economic forecasts.
The central bank also left its key interest rates unchanged at 0.5 percent, as widely expected. The rate now stands at the lowest since the bank was established in 1694. The previous change in the rate was a reduction of 0.5 percentage points in March 2009.
Peter Dixon, analyst at Commerzbank said there is a definite sense of nearing the end of the QE policy and any possible expansion might be very limited in scope. Yesterday’s non decision regarding monetary easing can be seen as a pause to assess where it stand in the cycle.
Dismal U.K. economic data earlier this week has weighed on the pound as the figures reinforced views Britain’s economy has yet to show any clear signs of recovery.
Industrial output posted an unexpected fall in May, while house prices also declined at a slower pace.
Markets were shocked last week after revised data showed that the UK economy shrank by 2.4 percent in the first quarter, its worst performance since 1958.
But the Sterling got a boost yesterday as equity markets rose. London’s FTSE 100 index was up 0.45% to close at 4,158.66.
During Asian deals on Friday, the pound strengthened against its European and Swiss counterparts. At 12:05 am ET, the pound reached a 4-day high of 0.8565 against the euro and a 3-day high of 1.7670 against the franc, compared to yesterday’s close of 0.8587 and 1.7618, respectively. The next upside target level for the pound is seen at 1.782 against the franc and 0.851 against the euro.
Against the yen, the pound weakened during early Asian deals on Friday. At 10:30 pm ET, the pound-yen pair touched 151.05, down from yesterday’s close of 151.93. If the pair slides further, it may likely target the 150.1 level.
The pound that closed yesterday’s trading at 1.6339 against the dollar fell to 1.6273 in early Asian deals on Friday. On the downside, 1.610 is seen as the next target level for the U.K. currency.
Looking ahead, the industrial production reports from France and Italy as well as the French current account-all for the month of May and the U.K. June PPI are expected to influence trading in the European session today.
Across the Atlantic, the U.S. trade balance for May, import and export price indexes for June and the Reuters/University of Michigan’s preliminary consumer confidence report for July have been slated for release in the New York session.
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