The pound weakened against the US dollar after Bank of Englands decision to maintain the record low benchmark interest rate and to leave its asset-purchasing program unchanged.
GBP/USD reached a session low at 1.6327 at 12:47 GMT, after having risen to a 27-month high on December 2nd. Support was likely to be received at November 29th low, 1.6315, while resistance was to be encountered at December 3rd high, 1.6437.
The Monetary Policy Committee, decided to keep the pace of its monthly asset purchases unchanged at 375 billion pounds. The Monetary Policy Committee consists of 9 members, 5 of which are from BoE and 4 are outside experts, which are appointed by the present BoEs Governor, Mark Carney. The asset-purchasing program was pledged to remain unchanged until unemployment, currently at 7.6 percent, falls below 7 percent. The Committee announced that it will keep the benchmark interest rate at the record low of 0.5%. The decisions were in line with expectations and confirmed the stance from banks last policy meeting on November 7th.
Neil Jones, head of European hedge-fund sales at Mizuho Bank Ltd. in London, said before the interest rate decision, cited by Bloomberg, “It’s an interesting day for the pound in the U.K., it’s a glimpse into the future of monetary and fiscal policy, things are getting better and going in the right direction. In the longer term that will send the pound higher still.”
The pound , tracked by Bloomberg Correlation-Weighted Indexes, was still up 3.1 percent in the past month, the best performer among 10 developed-nation currencies.
Speculation of a cut in bond sales was reinforced, as the Chancellor of the Exchequer George Osborne, cited forecasts that the UK economy will expand by 1.4% in 2013, up from preliminary estimates of 0.6%. According to the median forecast of 19 banks that deal directly with the UK Debt Management Office, cited by Bloomberg, the office is expected to cut its gilt issuance to 153.7 billion pounds from the 155.7 billion pounds it estimated in April.
The benchmark 10-year gilt yield fell three basis points, to 2.88% after climbing to 2.91%, the highest level since September 24th. The 2.25% bond due in September 2023 rose 0.225, or 2.25 pounds per 1,000-pound face amount, to 94.72.
U.K. government bonds handed investors a loss of 4 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1.6 percent and U.S. Treasuries declined 2.7 percent.
Meanwhile, investors awaited the release of the US GDP for the third quarter, which is expected to be revised upward to 3.1% from initially estimated growth of 2.8% in October. Another reports due today are the number of initial jobless claims and the Consumer Spending for the third quarter.
On Friday, December 6th, the Labor Department will release the keenly anticipated data on non-farm payrolls and rate of unemployment for November. According to analysts’ projections, numbers will probably show that US employers hired 183 000 workers in November, compared to 204 000 in October. This will be the largest annual gain in payrolls since 2005. Meanwhile, the unemployment rate is projected to fall to 7.2%, the same rate as in September and the lowest since November 2008.
Elsewhere, AUD/USD fell to a session low at 0.9014 at 0:36 GMT, also the pair’s lowest point since September 3rd, after which consolidation followed at 0.9034. Support was likely to be received at September 3rd low, 0.8972, while resistance was to be met at December 4th high, 0.9138.
USD/JPY hit a session low at 101.85 at 07:20 GMT, losing 0.5% on a daily basis. At 09:04 GMT the pair traded at 102.06. Support was likely to be received at December 4th low, 101.82, while resistance was to be encountered at December 4th high, 102.83.