Sterling Digest, March 4 2013: more stimulus possible

• Posted by faithmight
• on March 3rd, 2013

As expected, sterling continued its descent and dropped to new lows last week as traders began to short GBP en masse. However, when much-lower-than-expected UK manufacturing PMI failed to produce a selloff on Friday, it became clear to me that perhaps sterling may be due for a bit of a correction. This week, traders are treated to rate decisions from the Reserve Bank of Australia, Bank of Japan, Bank of Canada, Bank of England and the European Central Bank. With poor economic data in the UK and the revelation of more MPC members in favor of additional monetary stimulus, the BoE could surprise the market with more accommodative policies. Any dovish announcement will see sterling break to new lows while a hold on policy could fuel a GBP corrective rally. It should be an interesting week.

• Negative interest rates idea floated by Bank’s Paul Tucker (BBC) [video]
• Poor UK manufacturing survey adds to triple-dip recession fears (The Guardian)
• Pound ‘is ugly but will rebound versus euro’ (The Telegraph)
• The great euro stampede: Do we really need to rush? Britons are flocking to buy currency but fears of a plunging pound may prove wrong (DailyMail)
• Why Pound Debasement Won’t Solve Industrial Malaise (Forex Live)
• Sterling’s Italian job (FT) [video]

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