Pound Declines on Asset Purchase Speculations

The pound posted a weekly decline versus multiple important currencies of its trading partners as a strong sentiment of risk aversion towards assets in Europe made traders to opt for refuge currencies overseas, as the British economic outlook is far from positive.

The pound was affected this week by a new wave of uncertainty regarding BOE’s monetary policy, which, even if it has paused it’s quantitative measures used to help the British economy to emerge from recession, reported through an statement that may reuse such measures and resume its rather inefficient asset-purchase program, if the U.K. faces further economic difficulties during this year. The U.S. dollar and the yen were the biggest winners versus the sterling towards the end of this week’s session as global risk aversion fueled by European budget deficit forced traders to protect their portfolios buying safer assets.

The outlook for the sterling is not only bad due to the Bank of England‘s declarations, but also the market sentiment in Europe is making banks and individuals to avoid injecting capital in the region, which is likely allow important currencies overseas to advance versus the sterling in the short-term.

GBP/USD closed this week at 1.5637 from 1.5771 on Thursday. GBP/JPY fell to 139.54 from 140.89.

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