British Pound Pummeled Despite Neutral BOE Tone as Political Uncertainty Builds

The British pound was ultimately the weakest of the majors on Thursday, despite the fact that the Bank of England left rates at 0.50 percent once again, as expected, and comments within the central bank’s policy statement were straight-forward. Indeed, the statement simply reiterated that the Monetary Policy Committee (MPC) would its £125 billion asset purchase program, to be financed by the issuance of central bank reserves. The MPC also said that it will take another two months to complete the program, and its scale will be “kept under review.” All told, there was nothing surprising here and certainly nothing to suggest that the BOE’s policy bias has changed in any way, shape, or form. Accordingly, GBP/USD hardly moved upon the ECB’s 7:00 ET rate decision, but clear market-movement came at 8:00 ET when the pair plunged over 200 points in a matter of minutes. The drop was generally attributed to rumors that UK PM Gordon Brown was preparing to resign, and though Brown’s spokesman denied the rumor, calling it “complete nonsense,” GBP/USD wasn’t able to recover as daily RSI fell from overbought levels for the first time since March 2008.
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