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Home / Analytics / Forex analysis & forecasts / Forex Fundamental analysis / Pound weakened significantly. Overview for 04.08.2016
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Pound weakened significantly. Overview for 04.08.2016

The GBP/USD pair weakened on Thursday after decisions of the Bank of England relating to the interest rate and the asset buyout program. 

The British Pound is getting cheaper against the US Dollar on Thursday. The current quote for the pair is 1.3137.

So, August meeting of the BoE was over in the same way it was expected by the market: the interest rate was decreased for the first time in a long period, now it’s 0.25% p.a. against 0.50% p.a. earlier. The asset buyout program, which, frankly speaking, was “depleted” as far back as in 2012 but wasn’t officially closed, today was expanded up to 435 billion Pounds (+60 billion).

This sum is intended for six months. A new program of buying corporate bonds, which was also announced today, implies the buyout of bonds worth 10 billion Pounds. The program will operate for 18 months. Using this tool, the Bank of England is counting on active performance of eminents of the corresponding bonds.

The decision relating to the asset buyout program wasn’t unanimous. Three members of the Central Bank, Martin Weale, Ian McCafferty, and Kristin Forbes, emphasized that there was no need in QE under the present situation.

Judging by the balance of powers, chances are high that “the rate issue” may be brought up once more until the end of the year. “The average temperature” in the BoE indicates that the rate must be a bit higher than zero. At the same time, needless to say that there is no necessity to introduce negative interest rate in the UK.

It would be incorrect to say that the BoE’s decision to decrease the rate was a bombshell. The Pound retreated by 1.3% in the pair with the US Dollar, that’s it. Investors seem to have already included all possible disasters in their previous summer sales, and right now are not afraid of any surprises.
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