British Pound Sterling | Currency News Views and Outlook

British Pound Sterling: Currency to feel 'minimal impact' from QE say UBS as GBP/EUR threatens 1.2

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Category: British Pound Sterling

Published on Wednesday, 08 February 2012 10:07

Written by Sam Coventry

The British pound is relatively unchanged from yesterday's close: The British Pound Sterling (GBP) in Euro (EUR), GBP/EUR, is at 1.2 on the dot.

The British Pound Sterling (GBP) in US Dollar (USD), GBP/USD, is at 1.5913 while the British Pound Sterling (GBP) in Australian Dollar (AUD) is at 1.4683.

The big news concerning the British pound is an impending decision on further quantitative easing (QE) to be announced by the Bank of England at midday.

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What will the impact be on the British pound? Nothing to worry about suggest UBS:

"Quantitative easing by the BoE will likely have a minimal impact on the pound, which has been fairly immune to easier policy over the past few months. This is due to a breakdown in correlation between the Gilt and FX markets, a stabilisation of UK data, a scaling back of estimates for the QE programme, the pound's close proximity to fair value, and positioning. Slowing flows from the Eurozone into the UK could, however, cause sterling to grind lower as it loses a source of support," says a morning foreign exchange rate note from UBS.

Yesterday's trading session saw investors get excited about a draft bailout agreement out of Greece, with the euro making some impressive gains.

This contributed to the pound euro exchange rate (GBP/EUR) falling below the 1.2 level. This key area continues to look weak this morning.

Elsewhere, Ben Bernanke struck a fairly pessimistic tone regarding improvements in the US unemployment problem, advising that recent improvements understate labour market weaknesses.

Greece will remain in focus today as the draft agreement drawn up yesterday gets put to the Greek parliament. There remains plenty of uncertainty and the bailout is far from a sure thing.