Pound sterling struck a high of 1.5499 and a low of 1.5270 yesterday as sterling tumbled to a 14 month low against the dollar yesterday after the Bank of England launched a second round of quantitative easing, surprising investors with the scale of asset purchases to revive Britain’s struggling economy. The BoE’s addition of 75 billion pounds to its 200 billion asset purchase programme highlights the precarious state of Britain’s economy as global growth slows, government spending cuts and tax hikes bite and consumers face high inflation and slow wage rises. The move is also intended to protect the UK economy against a deepening euro zone debt crisis. The European Central Bank embarked on its own easing measures yesterday, pledging longer-term liquidity to banks as central banks around the world fight to defend against the negative impact of festering debt problems. The BoE’s decision to buy 75 billion pounds in UK assets over four months was negative for sterling as the UK leads other developed countries in the latest round of flooding the market with currency while keeping rates historically low. The announcement surprised many in the market who had been expecting the central bank to launch more QE in November. The pound fell roughly 1 percent on the day to 1.5270, compared with around 1.5466 before the announcement. Pound’s next key support level was at 1.5190, the 61.8 percent retracement of sterling’s 2010-2011 rally. Another round of asset buying would keep the pound under selling pressure, particularly against the dollar, in part as the Federal Reserve has not yet embarked on its own monetary easing campaign so far.
DAILY TECHNICAL RESISTANCES AND SUPPORTS CURRENT PRICE: 1.5480 Resistances: 1.5610 1.5720 1.5800
Supports: 1.5190 1.5110 1.4990