BoE Cuts Rates, GBP Headed Above 1.55?

Daily Forex Fundamentals | Written by GFT | Jan 08 09 14:34 GMT |

As you may now, the Bank of England cut interest rates by 50bp to 1.50 percent, an all time record low for the 300 year old central bank What I found most interesting about the BoE Monetary Policy Statement is the credit that they are giving to the weak sterling. "But the substantial depreciation in sterling over recent months may help to moderate the impact on UK net exports of the slowdown in global growth." This is one of the arguments that I gave in my 2009 British Pound Outlook about why we expect the UK to be one of the first countries to recovery from the global economic downturn. As for further rate cuts from the central bank, more is likely given the pessimistic tone of the BoE statement. Inflation is also expected to ease sharply. However the GBP/USD has broken above the 50-day SMA and entered our buy zone as the rate cut confirms the aggressiveness of the central bank. As long as the currency pair remains above 1.4245 on a closing basis, we could see a move to 1.5585. Kathy Lien http://www.gftforex.com DISCLAIMER: GFT refers to Global Futures & Forex, Ltd. and all of its divisions, branches and subsidiaries, including Global Forex Trading and GFT Global Markets UK Limited. GFT Global Markets UK Limited is authorized and regulated by the United Kingdom Financial Services Authority. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful. Trading of foreign exchange contracts, contracts for differences, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is possible to lose more than the initial investment. In Australia, GFT means Global Futures & Forex, Ltd. ARBN 103 508 461, AFS Licence 226625. A Product Disclosure Statement (PDS) is available at www.gft.com.au. You should read and consider the PDS before making any decision to deal in GFT products. © 2008 Global Futures & Forex, Ltd. All rights reserved.