Sterling Declines before the 2-Day Meeting

For the 1st time in last 3 days, Sterling has declined against the greenback. Today, the policy makers of the Bank of England sat for a 2-day meeting and they will decide whether more stimuli should be added in an attempt to revitalize the struggling economy of this European country. Pound actually, tumbled against most of its major counterparts and it is expected by many of the analysts that the Central Bank will be increasing the asset purchase target to minimum 400 billion pounds. Currently, the target is at 375 billion pounds. Incidentally, the Government bonds of UK were more or less unchanged on today.

According to the Foreign Exchange Strategist of Barclays Plc., Raghav Subbarao, many investors feel that if more asset purchases are introduced, that will weigh on Pound. Raghav added further that he doesn’t think that any sort of policy change will be introduced during the 2-day meeting. The Pound has declined by 0.5% on today and is priced at $1.5053 per USD. On 1st March, incidentally, the currency had declined to $1.4986 marking its weakest level since July, 2010. Against Euro, Sterling has tumbled by 0.1% on today and currently 1 Euro costs 86.37 pence.

In 2013 till date, Pound has got down by 5.6% and this is the worst performance among the major developed market currencies. The USD increased by 2.6%, whereas, Euro has posted gains of 1.2%.

As far as last month’s monetary policy decision is concerned, the policy makers are fully ready for increasing the quantitative easing in an attempt to recover the economy. As far targeted measures to be considered, the policy makers clearly defined that some of these may not be within Central Bank’s scope and those are duties of the respective provinces or some other Government departments.

The benchmark 10-year British gilt’s yield traded at 1.96% on today. On the other hand, the 1.75 percent bond which is due in September, 2022 is currently at 98.215.

The UK housing market is improving and the values may increase further, as far as the reports of Halifax are considered. Halifax, which is the mortgage unit of Lyods Banking Group, stated that prices have jumped up by 0.5% in February, from that of January. The Government bonds of UK have declined by 1% in 2013 till yesterday, whereas, the decline for German bonds have been 0.5%.