Sterling stronger after BoE update

The pound is near an eight-month high versus the US dollar after positive guidance from the UK central bank.

The pound is trading at $1.5969, up 0.4% on the day, after the Bank of England (BoE) vote unanimously to keep interest rates at the rock bottom level of 0.5% and maintain the bond buying scheme of £375 billion per month. Interest rates will remain at this record low level until the unemployment rate falls to 7% (it is currently 7.7%). This indicates that the BoE are committed to aiding the economy.

The UK central bank has upped its guidance for the third quarter from 0.5% growth to 0.7%, positive news which has given traders additional confidence.

At the 7pm (London time) the US Federal Reserve will update us on their monetary policy. The existing quantitative easing (QE) programme is $85 billion per month, a stimulus package which helps the US economy but weakens the currency. Some economists are predicting a reduction of €10 billion per month, but if the reduction is more we could see traders sell the pound and buy the US dollar.

Spot FX GBP/USD chart

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CFD’s zijn complexe instrumenten en brengen vanwege het hefboomeffect een hoog risico mee van snel oplopende verliezen.