The pound remained flat against the European single currency during the overnight trade, but gained against the dollar on speculation Federal Reserve will introduce the additional measures to lower the borrowing costs to stimulate the economy. Fed Bank of New York President said yesterday there’s more the central bank can do to boost the ailing economy. Similarly, Bank of England Monetary Policy Member Mr. Martin Weale, who earlier this year pushed for rate increase, now argues that there is a very strong case for extending asset purchase program in 2012 if the economy doesn’t improve. Mr. Weale said it was perfectly possible the economy is already shrinking and that investors are right to conclude that the central bank is likely to extend QE program beyond the 275 billion pounds already committed to. Expect for the pound to remain driven by market risk aversion, as there are no data releases or policy speeches scheduled for today.
The euro continued with its downward trend on concerns Eurozone debt crisis is spreading to larger economies including Spain, Italy and France. The single currency consolidated ahead of the Spanish general elections that are likely to see ruling Socialist party toppled. Looking ahead to today, German Producer Prices headline the economic calendar, with expectations for the figures to increase by 0.1% from previous month.
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