The pound held steady against its major rivals on Thursday following the Bank of England decision to maintain the size of quantitative easing at GBP 375 billion and the record low interest rate unchanged as expected by economists.
At the end of two-day rate setting meeting on Thursday, the Monetary Policy Committee led by Governor Mervyn King voted to retain the asset purchase programme at GBP 375 billion. The previous change in asset purchases was in July, when it was raised by GBP 50 billion.
The MPC expects the asset purchases programme to take another two months to complete. It said the scale of the programme will be kept under review.
The panel also decided to hold the key interest rate at 0.50 percent. The current rate is the lowest since the central bank was established in 1694.
Market is keenly waiting for the ECB rate decision, which is due out at 7:45 am ET. The ECB is widely expected to unveil a stellar plan to help lower struggling countries' borrowing costs and support the European economy. The European Central Bank is likely to cut its record low benchmark interest rate, known as the refi, to 0.50 percent from 0.75 percent.
European Central Bank President Mario Draghi will hold a regular press conference at 8.30 am ET. He is expected to announce measures to battle the sovereign debt crisis that has plagued the euro area, which could include buying bonds of peripheral governments.
Draghi told European lawmakers in a closed-door meeting on Monday that the central bank is not averse to buying government bonds of up to three-year maturities on the secondary market.
Some economists also say that Draghi may not reveal enough details regarding a possible ECB bond-buying plan as there is unlikely to be any consensus within the Governing Council, which meets in Frankfurt.
The U.K. house prices declined for the second straight month in August and continue to tread water, Lloyds Banking Group's Halifax division said today.
House prices were down 0.4 percent from a month ago, when it fell 0.7 percent. The two successive decreases largely canceled out the increases recorded in May and June. Economists had forecast a 0.2 percent rise for August.
The pound rose as high as 124.95 against the yen before holding steady around 7:15 am ET. The next likely resistance for the pound-yen pair is seen around the 125.50/55 area and the probable support is visible at 124.0/10 level.
The pound erased some of its recent losses against the currencies of Europe and Switzerland after the rate decision. The pound was trading at 1.52 against the franc and 0.7925 against the euro around 7:05 am ET, off its recent lows of 1.5176 and 0.7942, respectively.
The Eurozone economy contracted as estimated earlier in the second quarter, data released by statistical office Eurostat showed today. Gross domestic products decreased a seasonally adjusted 0.2 percent sequentially in the second quarter, in line with the preliminary estimates.
On an year-on-year basis, the economy contracted at a faster rate of 0.5 percent than 0.4 estimated initially. In the first quarter, GDP remained unchanged year-on-year.
The cable moved moved out of its recent-ranges immediately following the Bank of England rate decision, rising as high as 1.5922 before leveling off around 7:05 am ET. The pound is presently worth 1.5912 against the dollar, compared to Wednesday's close of 1.5905.
Looking ahead, initial jobless claims for the week ended September 1, the ADP employment change and the ISM non-manufacturing data -both for August are the key data to focus in the New York session besides the closely watched ECB rate decision and post meeting press conference of Draghi.
by RTT Staff Writer
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