Daily Forex Analysis by Finexo.com 19/11/2009


The British Pound Sterling fell broadly on Wednesday after minutes of the Bank of England’s November 5th meeting were release showing a stark difference of opinion on their quantitative easing policy. Analysts assumed that the BOE’s decision to cut the asset purchasing program in half was a sign that the Monetary Policy Committee was tapering down the stimulus program, however governor Mervyn King said that the MPC was keeping all options on the table for now. The release of the minutes only confused things more when it was shown that the majority of members of the MPC wanted a 25 Billion Pound increase in the stimulus program and one member even called for a 40 Billion Pound increase.

The news sent short futures of the GBP soaring while the currency dropped across the board. Investors did not react positively to this as it seems that the board is widely divided on what to do, as if they are not sure which direction to go – making the move to halve the asset purchasing program in November out of total uncertainty instead of expanding it as it seems most board MPC wanted.

At 10:10PM GMT, the Sterling was down .4% to the US Dollar to 1.6742, down 1% against the Euro to .8931 – the biggest one day gain for the Euro against the Pound in close to three months, down 1.3% to the Swiss Franc to 1.691 and down .31% versus the Japanese Yen to 149.65. The Sterling also fell .02% to the Canadian Dollar to 1.7677 although it was trending upward, and down .18% against the Australian Dollar to 1.8025 after having been up for most of the session.

Chart: US 10-year note yields

Again, we note that US Dollar 10-year note yields are trading up against important support after having traded in a very constricted range for months. No even risk suggests a dramatic move here, but certainly an interesting level to watch as an indicator on overall risk appetite if yields are able to drop through this level (this suggests more concern than we are seeing in other asset markets like stocks and commodities at the present time). This is especially important, as always, for JPY crosses.

Written by Finexo.com