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Pound Firms As Bank Of England Boosts QE Program; Holds Rate Steady

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The pound trimmed its early losses against its major counterparts in the European session on Thursday, after the Bank of England kept its record low interest rate unchanged and expanded its asset purchase programme to counter the economic impact of the coronavirus during the winter.

The nine-member Monetary Policy Committee unanimously decided to raise the size of the asset purchase programme by GBP 150 billion to GBP 895 billion from GBP 745 billion. Economists were expecting an expansion of GBP 100 billion.

The MPC also voted 9-0 to hold the interest rate at 0.10 percent.

Policymakers said they stand ready to take further actions if necessary to help the economy recover and ensure that inflation returns to 2 percent target.

Consumer price inflation is expected to remain at, or just above 0.5 percent during most of the winter, before rising quite sharply towards the target as the effects of lower energy prices and VAT dissipate. Inflation is projected to be 2 percent in two years' time.

Due to the reimposition of social distancing measures, the bank expects overall GDP to fall by around 2 percent in the fourth quarter of 2020.

The latest KPMG and REC Report on Jobs showed that the UK permanent job placements fell in October as greater uncertainty over the outlook amid rising Covid-19 infections weighed on hiring activity.

However, greater uncertainty drove a further marked rise in temp billings.

The currency fell against its major rivals in the Asian session after a media report showed that the Bank of England is considering the possibility of negative interest rates in future.

The pound moved up to 1.3041 against the greenback, recording a 0.8 percent rise from a low of 1.2932 seen at 5:45 pm ET. The pair had finished Wednesday's deals at 1.2984. The pound is likely to test resistance around the 1.34 region, if it strengthens again.

After dipping to a 3-day low of 135.08 at 7:45 pm ET, the pound turned higher against the yen, gaining 0.7 percent to 135.98. The GBP/JPY pair was valued at 135.70 when it ended trading on Wednesday. Further rally in the currency may face resistance around the 138.00 level.

Final data from IHS Markit showed that Japan's service sector continued to contract in October but the pace of decline eased amid a relaxation of Covid-19 restrictions.

The services Purchasing Managers' Index rose to a nine-month high of 47.7 in October from 46.9 in September. The flash reading was 46.6.

The pound was up by 0.7 percent at 1.1875 against the franc, following a 1-week drop to 1.1792 at 1:45 am ET. At Wednesday's close, the pair was worth 1.1829. Immediate resistance for the pound is likely seen around the 1.20 level.

Survey data from the State Secretariat for Economic Affairs showed that Switzerland's consumer confidence weakened in the fourth quarter as households' concerns regarding the economic situation and the labor market increased amid a resurgence in the coronavirus pandemic in Europe, defying expectations for a strong improvement.

The consumer confidence index rose fell to -12.8 from -12.0 in the third quarter. Economists had forecast a score of -8.0.

The pound registered a 0.7 percent rise against the euro, approaching 0.9006. The rally came after an 8-day fall to 0.9069 at 1:45 am ET. The pound had ended yesterday's trading session at 0.9021 against the euro. On the upside, key resistance is seen near the 0.88 level.

Looking ahead, U.K. construction PMI for October and and Eurozone retail sales for September are due out in the European session.

The U.S. weekly jobless claims for the week ended October 31 will be featured in the New York session.

At 2:00 pm ET, the Fed announces its decision on interest rate. Economists widely expect the federal funds rate to be kept at 0 - 0.25 percent.

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