The Great Britain pound dropped during the past trading week as the Bank of England moved forward with monetary stimulus, introducing substantial easing measures in hopes to help Britain’s economy to weather the impact of the Brexit.
The BoE made a move during the week, announcing stimulating measures. This was not unexpected by markets. What was unexpected is the amount of stimulus introduced by the central bank (a 25 basis point cut in Bank Rate to 0.25%; a new Term Funding Scheme to reinforce the pass-through of the cut in Bank Rate; the purchase of up to £10 billion of UK corporate bonds; and an expansion of the asset purchase scheme for UK government bonds of £60 billion, taking the total stock of these asset purchases to £435 billion). It is clear that British policy makers are worried about the potential impact of the Brexit and want to help the economy to withstand it.
The pound fell due to the event, and it was especially weak against the US dollar and the Japanese yen. The dollar got support from positive non-farm payrolls. Meanwhile, the Bank of Japan introduced a new round of stimulus as well, but markets thought it was insignificant and propelled the yen higher.
GBP/USD fell 1.1% from 1.3221 to 1.3073 over the week. GBP/JPY dropped 1.7% from 135.31 to 133.01. EUR/GBP opened at 0.8442, touched the weekly low of 0.8343 but bounced to end the week at 0.8479.
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