Pound Lower on ECB Liquidity Action

The pound is lower against EUR and USD, as the European Central Bank announced last night that it would engage in coordinated liquidity funding operations with other central banks (the Fed, Swiss National Bank, Bank of Japan) in order to ease dollar based funding for European banks, thus dampening concern about the European banking sector.  This news came on the back of fresh support for Greece by German and French officials and the market perceived the news as euro positive and as an indication that the Eurozone leaders may be on the path to solving the sovereign debt issues in the single currency area.  With no data out in the UK today, expect the pound to trade in response to developments on the continent.  The dollar is remaining higher against the pound as risk aversion is prompting investors to flock to the perceived safe haven of the USD as concerns regarding economic recovery in the UK are still very much on their minds.  Next week’s Bank of England minutes release is crucial for the pound in terms of economic event risk, as the market will look for indications for any further quantitative easing in the near term.