Sterling Jumps as BoE Increases Stimulus
THE TAKEAWAY: BoE raises asset purchase program to 375 billion Pounds, keeps interest rate at 0.50% -> BoE says signs point to further weakness -> Sterling reverses earlier losses
Majority of analysts expected the Bank of England to increase their asset purchase program from 325 billion Pounds to 375 billion during their July meeting, and that’s exactly what the central bank did. Monetary Policy Committee members voted to increase stimulus while keeping the interest rate unchanged at 0.50% in an attempt to battle the stress placed on the UK economy by the European debt crisis.
With the new monetary policy that is expected to take 4 months to complete, the BoE reported that UK output has barely grown over the past year and signs point to further weakness. The BoE is still concerned about debt in some Euro nations, but on the positive side, they expect to see inflation edge down in the near term.
Although an increase in stimulus is usually currency negative, GBDUSD took a small rally and reversed much of the session’s earlier declines, possibly due to a general boost in risk appetite on the news of stimulus. 1.5600 remains the short-term resistance.