The Great Britain pound fell today on the concern that the slow recovery would force Britain’s central bank to extend its stimulus measures. Earlier the currency surged versus the US dollar to the strongest level since January.
The sterling was weakened by the concerns that the weak UK economy would prompt the Bank of England to keep its benchmark interest rate at the record low level of 0.5 percent. The speculation that the Bank plans to buy the bond for £200 billion, while the Central European Bank pursue plans to end the stimulus, wasn’t helpful either. Rachel Lomax, the former Deputy Governor of the Bank of England, voiced concern that the stimulus may cause the asset bubble.
DeAnne Julius, the former policy maker, supported this outlook saying:
It is time to begin withdrawing the stimulus. Interest rates are very low and the deficit is very large, so it is tricky to come out of a situation of extreme policy stimulus like that. I know that people in those positions at the Bank of England are debating very actively about what needs to be done.
GBP/USD fell from 1.6009 to close at 1.5928 after it climbed as high as 1.6102. GBP/JPY closed at 130.12 after opening at 130.44.
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