Pound Advances against the Euro on BOE Decision

By TraderVox.com

Tradervox.com (Dublin) – The UK currency has advanced against the euroarea currency after the Bank of England decided to refrain from extending asset-buying program and left the interest rates at the lowest level. The pound improved against the dollar after declining yesterday. The improved after the Bank of England MPC decided to keep key interest rate at 0.5 percent.

According to Ian Stannard, who is the head of foreign-exchange strategy in London at Morgan Stanley, stated that the market expectations for asset-purchases were suppressed hence further easing would not have had a profound impact on the economy. He, however, indicated that there is a high possibility of more easing next year.

The pound, which has increased by 1.5 percent this year, advanced yesterday after England’s 10-year gilt advanced by 0.01 percentage points. The currency advanced by 0.2 percent against the euro to trade at 79.74 pence per euro at 12:12 yesterday. The pound had reached its strongest of 79.69 earlier in the day, which was last registered in October 1. The sterling was little changed against the dollar, exchanging at $1.5975. It had earlier dropped to its lowest since October 23 of $1.5930.

According to Alan Clarke, a London-based economist at Scotiabank Europe Plc, the decision to refrain from QE is quite priced in because is a consensus view of the MPC. Kit Juckes, the Head of Forex research in London at Societe Generale SA, also noted that the policy makers have been “pretty outspoken” in stating that the QE will make no changes to the economy for now.

The UK currency is headed for another weekly drop against the dollar, as investors forecast that UK trade deficit narrowed in September. The pound opened the day still down at $1.5982 in London today. This is a 0.2 weekly drop. The pound was trading 79.80 pence per euro today, after appreciating yesterday to 79.61.

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