Forex trading: Sterling surged in trading as the Bank of England refused to increase stimulus.
After days of falls, and reaching a new two-and-a-half year low against the dollar this week, the pound surged upwards in Forex trading today as the Bank of England refused to increase easing.
All bets had been on the MPC voting to up the QE package by a further £25 billion but Mervyn King and co decided to hold the asset purchases at £375 billion and interest rates at 0.5%.
As a result, sterling bounced off recent lows against major currency pairs in the Forex trading markets.
GBP/USD was up 0.5% in a matter of minutes and the pound saw a similar gain against the euro.
IW says: Unlikely to be a sustained gain against USD, but could hold up against EUR depending on how markets view France’s latest “beg for mercy from more austerity”, not to mention the mess in Italy. The danger for sterling is that the BoE hasn’t ruled out more QE.”
Japan rejects easing
It was a similar story in Japan as the central bank also voted against a proposal to step up monetary stimulus. However, this came as no surprise as the imminent arrival of Asian Development Bank president Haruhiko Kuroda will likely see bolder action come April.
IW says: ”Interesting one this. If Japan goes too far re trying to create inflation, interest rates on its debt will rise, causing the opposite effect to that intended.”
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