The Pound has gone down below the $1.60 mark against the greenback for the first time in last 5 weeks. There are speculations among the investors that the officials of Bank of England will hint introduction of additional stimulus after the meeting conclusion. The 2-day meeting has already started. This attempt of the officials to help recover the struggling economy of United Kingdom, however, is having a negative impact on the country’s major currency: Pound.
Not only against USD, but, the Pound has declined against almost all of its major counterparts. The latest Government report also stated that the country’s trade deficit has gone to a lower level, in comparison with the forecasts made by the economists.
According to the Foreign Exchange Strategy’s Departmental Head for Canadian Imperial Bank, Jeremy Stretch, many investors predict that the Bank of England officials will go with the further Quantitative Easing program. Jeremy added that if Sterling (The Pound is often called with this name) goes beyond the $1.5995 level against USD, it may experience a rapid decline as well.
After dropping down to $1.5993 per USD marking its lowest level since 30th November, it however increased a bit and finished at $1.6012 per USD. The currency, on the entire day, declined by 0.3%. It is currently priced at 81.52 pence per Euro. The 10-year British gilts were down by 2 basis points to get to 2.03%. On the other hand, the 1.75 percent bonds which are due in September, 2022 are currently at 97.595.
The Office for National Statistics of United Kingdom released a report stating that the trade deficit for November was at 9.16 billion Pounds. Incidentally, the same was at 9.49 billion Pounds in October. In the last week, Sterling has experienced a fall of 0.9% and thereby became the worst performing currency in all of the developed market currencies.
The Strategist of RIA Capital Markets Ltd., Nick Stamenkovic, stated that the investors are not willing to take any risk unless the minutes of the Bank of England meeting come out. Nick added that overall sentiment for the 10-year-yields is bearish though and by end of 2013, it should reach 2.60%.
The break even rate which determines the yield difference between the gilts and the index-linked securities for United Kingdom has gone down for the 3rd straight day, currently being at 2.66%.