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Forex: GBP/USD, 1.50 still working its magnetic magic

Xstreet.com (Barcelona) - After the BoE's inaction on either policy rates or the extension of gilt purchases, excited counter-trend Pound players pushed the currency away from the psychological $1.50 area, reaching a session high of 1.5080, 50% fib retrac of the 1.52 -1.4965 decline, yet a steady evaporation of bids has snapped the rate back to the 1.50 vicinity at the NY close.

Today's BoE meeting came without statement on monetary policy, so the only new piece of information, as TD Securities Senior Global Strategist Jacqui Douglas observes, is what the BoE is planning to do with the £6.6bn from its APF maturing on 7 March.

Jacqui notes: "The BoE announced that it will split the purchases evenly across the pre-existing 3-7y, 7-15y, and 15y+ buckets. However, the pace of buying over the next month is pretty much on par with what we would see if QE were running, so rather than focusing the buying to get an impact, they’ve decided to reinvest this money over just two weeks to help moderate some of the knee-jerk sell-off. This still leaves the door open to an actual extension of QE if the BoE deems it necessary next month."

Going forward, risk remains sweked towards more QE at some point, Jacki says; "The minutes of the Feb meeting revealed a fairly tight 6-3 vote, with Governor King part of the group that dissented in favour of a further £25bn of QE, and we’ll likely see another split vote when the minutes from the March meeting are revealed in a couple of weeks" she said.

On the technical front, as Adam Button, currency analyst at Forexlive, notes: "Cable has broken 1.50 several times but still hasn`t closed below the important psychological mark. GBPUSD broke to a long-term low yesterday but a close below 1.50 would be a comforting sign for the bears. The close on March 1 was 1.5038 and yesterday`s close was 1.5018."

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