British Pound Sells Off Following Bank of
England Announcement
The Bank of England announced today that
they plan on swapping GBP50 billion worth of
UK bonds for mortgage securities in an
effort to add liquidity to the lending
market.
For a long time, the Bank of England has
refused to follow in the Fed’s footsteps
because they did not want to foster an
environment where banks and financial
institutions would start relying on central
bank bailouts. Their laissez-faire attitude
received significant criticism, causing the
central Bank of England to finally buckle
under the weight on political and economic
pressure. Taking a page out of the
Fed’s book, they have swapped their safe and
secure UK gilts for slightly riskier
mortgage backed securities. The market
has not taken this move positively as the
British pound is down over 200 pips from its
high.
Majors Point to Easing Risk Aversion
The majors have positioned to signal gains
for the Australian and New Zealand dollars,
as well as the US dollar’s pairing against
the Japanese Yen. USDJPY price action has
tracked closely to the Dow stock index,
while the AUD and the NZD bore the brunt of
carry trade liquidation fueled by recent
bouts of risk aversion. Interestingly, the
same cannot be said of Franc, with the
USDCHF trading sideways in a range. The Euro
remains a momentum trade, seeming to need to
hit 1.60 regardless of developing weakness
in the Euro Zone. The Pound is left looking
for direction following the announcement of
a last-minute liquidity injection from the
BOE.
its independence and continues to move along
established technical trends.
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