January 25, 2015 - Written by Frank Davies
STORY LINK US Dollar to Pound Sterling Weekly Roundup: January 19 to 23
The week got off to a slow start for the Pound and US Dollar, as US markets were quiet due to the national holiday celebrating Martin Luther King’s birthday.
Midweek, the US Dollar softened against a number of peers but remained at multi-year highs after the Bank of Japan refrained from expanding its monetary easing programme and instead chose to expand schemes aimed at boosting lending. The BOJ maintained the size of its stimulus program and reiterated its pledge to increase base money at an annual pace of ¥80 trillion through buying government bonds and risk assets. The ‘Greenback’ then advanced after data smashed economist forecasts. The number of housing starts in the US surged in December to reverse the sharp declines recorded in the previous month.
The Pound meanwhile weakened after the minutes of the Bank of England’s January policy meeting showed that policy makers were unanimous on calling for interest rates to remain at the record low level of 0.5%.
‘The two hawks rejoined the broader dovish camp within the MPC and that’s going to keep Sterling under pressure. Although there are some improvements in some of the labour-market data, the pickup in the wages are disappointing; not really gaining the momentum the market has been looking for,’ said the head of European foreign exchange at Morgan Stanley.
The US Dollar then advanced to an 11-year high against the Euro ahead of the ECB policy meeting and firmed against the Australian and New Zealand Dollars which held onto losses following a surprise interest rate cut by the Bank of Canada. It then surged to an 18-month high against Sterling after the ECB surprised the global markets by announcing a massive monetary stimulus worth €1 trillion.
As the week ended, the US Dollar made a sixth consecutive weekly advance against the Euro as market attention shifted from the Greek general election. The vote has the potential to alter the balance of power in the nation and some economists are warning that yesterday’s move by the ECB could have an effect on future Greek policy.
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