British Pound Gains Across the Majors as British PM Brown Announced Loan Guarantees

The British pound was actually the strongest of the major currencies we follow, beating out the “safe haven” US dollar and even the Japanese yen, which tends to benefit the most from increased volatility in the markets. What gives? The British pound has been, by far, one of the most unpredictable currencies as its dynamics against the euro have been as closely followed as the GBP/USD pair. EUR/GBP is currently consolidating above 0.90, and where the pair goes next may have a lot to do with the euro’s broad response to the ECB’s rate decision on Thursday morning. Working in the British pound’s favor on Wednesday, though, was a pledge by UK Prime Minister Gordon Brown to guarantee 21.3 billion pounds worth of loans to companies in an effort to force banks to lend. This comes in addition to the previously announced 50 billion-pound bank recapitalization program and takeover of the Royal Bank of Scotland. This is generally in line with the sentiment of Federal Reserve Chairman Ben Bernanke’s speech yesterday, in which he noted that more capital injections, guarantees, and efforts to remove toxic assets off the books of financial institutions would be needed to ensure financial stability in the long term. 

Related Article: British Pound Weekly Outlook 


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