England’s Central Bank Cuts Rates, GBP Headed Above 1.55?

As you may now, the Bank of England cut interest rates by 50bp to 1.50 percent, an all time record low for the 300 year old central bank.

What I found most interesting about the BoE Monetary Policy Statement is the credit that they are giving to the weak sterling.

“But the substantial depreciation in sterling over recent months may help to moderate the impact on UK net exports of the slowdown in global growth.”

This is one of the arguments that I gave in my 2009 British Pound Outlook about why we expect the UK to be one of the first countries to recovery from the global economic downturn.

As for further rate cuts from the central bank, more is likely given the pessimistic tone of the BoE statement. Inflation is also expected to ease sharply.

However the GBP/USD has broken above the 50-day SMA and entered our buy zone as the rate cut confirms the aggressiveness of the central bank. As long as the currency pair remains above 1.4245 on a closing basis, we could see a move to 1.5585.


About Kathy Lien 235 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.

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