UK BOE Interest Rates and Asset Purchase Target - BOE adds 50 Billion Quantitative Easing

This Thursday February 9th at 12:00 noon GMT (7:00 EST) the BOE announced their monthly decisions on Interest Rates and Asset Purchase Facility (APF). All Analysts of course predicted that the Bank of England (BOE) would stay on hold and leave interest rates where they are at 0.5%. However there was an interesting split between analysts surveyed by Bloomberg on the amount of extra QE they would add to the APF. Out of 50 analysts, 15 expected the BOE to add an additional 75 Billion to the APF to bring the total to 350 billion, 34 expected the BOE to only add 50 billion for a total of 325 billion, and 1 analysts expected them not to add anything. The estimates had come down since CPI appears to be confirming that inflation is finally turning around.

Last time the BOE raised the APF was on October 6th 2011 and the GBPUSD British Pound Sterling versus US Dollar Forex Pair dropped about 2 and a quarter cents from 1.5485 to 1.5270. However several hours after hovering and consolidating near those new lows, the pair lifted up and began an amazing rally which lasted until October 27th and brought the pair back up to 1.6150. The EURUSD, AUDUSD and other pairs bottomed out on October 4th and started their way back up. This was all in the midst of lots of negative sentiment..

Here is the 10 second chart of GBPUSD on the reaction. The BOE only hike 50 Billion instead of 75 Billion, so after a tiny dip the pair rallied:

There was always the risk that they could do the full 75 Billion, this would have been more bearish, as it was on October 6th 2011. As we can see from this chart the 1 minute chart of the 2.5 hours between the Trade Balance & Industrial Production at 9:30 GMT to the Interest Rates and Asset Purchase Target at 12:00. Adding any QE is bearish for a Currency and the initial reaction should be down, but longer term the QE can stimulate the economy and help support GDP which is bullish. Of course for this release, it was pretty much priced in that the BOE would do some QE.

This is the 10 second chart of GBPCHF & EURGBP

and the 30 second chart of the GBPCHF to show more of the move:

and the 30 second chart of the GBPJPY and EURGBP:

It was a choppy day, up and down, up and down...little resolution one way or the other...