GBP/USD (a 4-hour chart)
Market expectations of a quarterly report of the Bank of England about negative news came true. The bank said that there won’t be tightening of monetary policy in the case of. The head of the bank, Mervyn King said that if necessary, the Bank, by contrast, may conduct further easing. The bank forecasts that UK GDP will reach pre-crisis level only in 2015. The pound was down all day.
The price tested 1.5670 but could fix above, and then fell flat on that level, once again updated at least. Movement continues downwards and the pair can meet support on one of the levels - 1.5502, 1.5478, 1.5443.
The British pound fell on Wednesday to its lowest level in six months against the U.S. dollar after the statement of Governor of the Bank of England Governor Mervyn King that the central bank is prepared to use a wide range of measures to stimulate the economy, including further monetary easing.
King said that the central bank will not raise interest rates to fight high inflation in an attempt to avoid the collapse of the nascent economic recovery. Although achieving growth through further purchases of bonds becomes more complicated, the Bank of England has not yet exhausted its capacity for stimulating.
Expectations regarding the continuing low interest rates, which makes the currency less profitable to invest, provoked the fall of the pound by 1% to an intraday low of 1.5523 dollars, its lowest level since the beginning of August.
If Britain wants to use a weaker currency as a means to support the economy and exports, the pound will have to fall much more, says Steven Inglender, a strategist at Citigroup in New York. GBP / USD should be below 1.50 and the euro / Swiss franc - above 0.90, "to have a significant impact on exports," he adds.