Pound Up as Asset Purchase Program Changes

The pound climbed significantly versus the dollar, and to a lesser extent versus the euro as the national central bank extended its

asset-purchase program less than expected, suggesting that the British economy is needing less government stimulus to find its way out of recession, increasing attractiveness for the U.K. currency.

The Bank of England has been using its asset-purchase program to stimulate the faltering economy in the U.K., and its further extension was lower by 12.5 percent in total number of funds than what most analysts suggested, at 200 billion pounds, indicating that in the mid-term future, the program may be abandoned, as the British economy is likely to recovery its growing pace which will lead to further interest rate hikes, adding confidence towards the pound that has been having a positive performance this week in trading markets. The quantitative easing measures used by the Bank of England so far were one of the biggest factors to push the pound down this year, as it influenced negatively the pound outlook and sentiment towards the U.K.’s economy.

Analysts were surprised by the BOE tone and measures regarding the asset-purchase program, shifting instantly the trends for the pound in foreign-exchange markets. The quickest the asset-purchase program wil be partially or totally suspended, the better will be for the pound in currency markets.

GBP/USD traded at 1.6579 as of 14:04 from 1.6508 yesterday. GBP/JPY traded rather neutral from yesterday at 150.09.

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