The pound fell for a fourth consecutive day today against its US counterpart as the Bank of England’s latest stimulus package kicked in, and expectations rose that an interest rate hike from the US Federal Reserve was on the horizon.
At 7.23pm (GMT) the British currency was trading at US$1.3062c down from US$13040c in yesterday’s trade.
Although a lot of the price movement has been priced into the pound in reaction to the BOE stimulus program, the US dollar has not had the same result with traders hesitant to take long positions in anticipation of a rate hike from the Fed,
“This is a continued feed-through into sterling weakness from the Bank of England,” said Sam Lynton-Brown, a foreign-exchange strategist at BNP Paribas SA in London.
We’re already pricing a lot for the Bank of England, whereas for the Fed very little is priced,” he added.
The bigger than expected quanitive easing program will have to be justified by weak economic data or we may see the British pound make a comeback according to Richard Falkenhall, a strategist at SEB AB in Stockholm
“The performance of the economy will be of growing importance for the pound as it also will feed into expectations on the BOE,” Mr Falkenhall said.
“If the economic impact turns out to be less severe than currently believed, I would say we could start to see some recovery of the pound as it clearly is long-term undervalued.” he added.
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