Forex News
March 11, 2013 @ 7:06 pm

Pound at 2-1/2 year low as BOE expected to ease monetary policy

Sterling is weak against most major counterparts due to growing speculation that the Bank of England may expand quantitative easing as the U.K. economy is at risk of falling into its third recession in four years.

In contrast, the Federal Reserve may cut back on its asset purchase programme later this year due to an improving US economy. The strong jobs data on Friday may lend support to this view.

The growing divide between the two economies has led to the sterling to tumble to a 2-1/2-year low against the dollar.

GBPUSD fell to a low of $1.4884 on Friday after data showed US non-farm payrolls surged by 236,000 in February, beating forecasts and pushing the jobless rate down to 7.7 percent, the lowest since December 2008.

Against the Australian dollar, the pound fell to a 28-year low as GBPAUD fell to $1.4532, the lowest since early 1985, on expectations of further easing from the Bank of England..

If the BOE decides to print more money in an effort to boost the sluggish UK economy, this increase the supply of a currency will drive down the value of the pound.

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