The Bank of England BOE made their announcement on Interest Rates and Asset Purchase Target (APT). Rates remained unchanged at 0.5% and APT also was unchanged at 200 Billion. All economists had predicted the BOE not to change rates or most had expected APT to stay the same as well, there was however 5% of economists who were expecting APT to rise 50 Billion. This was odd since earlier last week with the higher UK GDP figures there was a chatter reported among dealing desks that the BOE could hike rates before the end of the year. With Australia, New Zealand, Norway, Sweden and Canada already having raised rates, traders are wondering when the ECB and BOE will follow. The US FOMC is still raising Quantitative Easing (QE) so there appears to be a growing rift between the USA and the rest of the world.
Anyhow just the small 5% of analyst who had predicted more APT, which is bearish for the British Pound, was enough for the GBPUSD to have a bit of an expectation of more APT priced in...indeed many link the UK economy to the US economy and were perhaps thinking that the BOE would follow the FOMC in QE2. The recent positive data out of the UK has for the meanwhile stopped this from occuring. Traders should stay aware of all the data to get the full picture, the BOE will not add QE just because the FOMC is, they will watch their own data to make that decision.
The USD has continued to sell-off as US traders wake up and join the rally started during the European session. Perhaps there was just many traders waiting to go long GBPUSD but wanted the news to get out of the way first. Initial move on GBPUSD from 1.6180 to 1.6220, my usual charts got jammed during the release so I post the British Pound FX Futures chart, which trades just a few tics from the spot fx rate. Another chart shows how the GBPUSD just kept moving up over the next 45 minutes, basically the USD sell-off had another lef as New York got going.
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