Will the pound weaken further today? Could be a busy day on the markets!
Good Morning Readers, today has the potential to be a very busy day for anyone buying or selling the pound as all eyes focus on the Bank of England (BoE) and whether or not they will embark on yet more QE. Quantitative Easing essentially weakens the currency concerned as the money supply is increased and the last two times this has been announced the pound has tumbled by a good few cents and pence against practically every currency! QE is a ‘shot in the arm’ for an economy and many would argue that it is just what the UK needs at the moment. This site is all about our opinions and forecasts and I personally don’t think we will see QE today. We could see the pound make some small gains because of this. If you are looking at doing any deal buying or selling the pound I would plan for all eventualities however… Hope for the Best, Plan for the Worst! You can speak to me on firstname.lastname@example.org to find out all of your options ahead of today’s announcements.
Going against the grain I think there is a good chance we will not see further QE today. Even though there is a general concensus that more QE is necessary at some stage – Mervyn King, the Governor of the BoE said so – a recent run of data for the start of this year has shown improvements in manufacturing and construction. PMI data has reported readings above 50 indicating growth. If I were an MPC member I would vote for no change in the current asset purchases programme until we see next months data. If I am right we could see the pound strengthen as the pound weakened yesterday on the back of anticipation of further QE (like it did in January). If I am wrong I would not expect any major change as this has to an extent already been priced in to the value of sterling.
Looking to the Eurozone however I would not be suprised to see an interest rate cut. The Eurozone looks more likely to be about to enter a dangerous recession because of the economies that are suffering. I think the ECB therefore needs to cut rates to promote growth because that is what is lacking and damaging not just the ‘PIGS’ but the rest of the Eurozone and the world.
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I look forward to speaking with you.