British Pound Soars on BoE Governor Comments

Over the past 2 weeks, the British pound has soared more than 8 percent against the U.S. dollar. Like many countries around the world, the U.K. has succumbed to higher gas prices but unlike some other countries, the weakness of the British pound has exacerbated the rise in inflation. Hotter consumer prices helped to fuel today’s gains in the British pound, but it was comments from Bank of England Governor King that took the GBP/USD above 1.47. Quantitative Easing has been kept a lid on gains in the pound, causing it to under perform currencies such as the euro. The CPI numbers are significant however because annualized CPI is now BACK ABOVE the BoE’s 3 percent target.

KingHowever this morning, BoE Governor King talked UP the pound, which is a dramatic departure from his previous comments. He said that there is:

“no reason why the sterling should go any lower” and that the sterling’s fall was not engineered. He also said that the central bank originally aimed for GBP75bn of Asset Purchase Facility over 3 months but “might need to do less if it works.”

These positive comments are probably a reaction to the recovery in the equity markets and the recent drop in bond yields.

The 1.4650 level in the GBP/USD is fairly significant (100-day SMA). If the currency pair manages to hold above that level, the next area of resistance is 1.50.

Graph 1

Image: eSignal

About Kathy Lien 236 Articles

Kathy Lien is an Internationally Published Author and Chief Strategist of DailyFX.com, one of the world’s most popular online websites for currency research. Her trading books include the highly acclaimed, Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings (2005, Wiley); High Probability Trading Setups for the Currency Market E-Book (2006, Investopedia); and Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game (2007, Wiley). As Chief Currency Strategist at FXCM, Kathy is responsible for providing research and analysis for DailyFX, the research arm of FXCM. She also co-edits the BK Forex Advisor, an Investopedia.com Premium Service with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the 2 Trillion/day FX market.

Kathy is also one of the authors of Investopedia’s Forex Education section and has written for Tradingmarkets.com, the Asia Times Online, Stocks & Commodities Magazine, MarketWatch, ActiveTrader Magazine, Currency Trader, Futures Magazine and SFO. She is frequently quoted by Bloomberg, Reuters, the Wall street Journal, and the International Herald Tribune and has appeared on CNN, CNBC, CBS and Bloomberg Radio. She has also hosted trader chats on EliteTrader, eSignal and FXStreet, sharing her expertise in both technical and fundamental analysis.

Visit: Kathy Lien

Be the first to comment

Leave a Reply

Your email address will not be published.


*