Bank of England’s Dovish Leanings Surprise
(eToro Blog) The Bank of England released the minutes from the February meeting wherein it was revealed that the division on the issue of quantitative easing is still evident. Dove Adam Posen was joined by David Miles who voted to increase the last QE round by £75 billion rather than £50 billion in order to address their concerns of “considerable” spare capacity. While the dovish stance is negative for Sterling, ideally, in the long run it is bullish for equities.
The GBP/USD is currently lower at 1.5709, and sentiment on OpenBook is strongly bullish. OpenBook guru Gavinwright, who happens to be a UK resident, is one of those traders expecting a recovery in the Pound. In the midst of closing out a dozen profitable positions in the EUR/USD, he also scalped two GBP/USD longs, with five more longs opened today; he expects 1.58 to be hit this week, and had been looking at 1.57 as one entry point. Guru robepu, with 484 copiers, also closed out a profitable long position earlier with a 14.67% gain as it the pair hit 1.5722 and subsequently opened another two longs, one of which is close to flipping into positive territory.
One economist says that the voting suggests that an easing bias is more prevalent than the Bank’s inflation projections had indicated. And while some recent economic indicators may have supported the Bank’s view that economic growth could be stronger than anticipated in the near term, that hasn’t swayed the various credit ratings agencies which warn that the U.K. could lose its coveted AAA rating. The U.K.’s relationship with the Eurozone puts their economy in serious jeopardy, given the growing likelihood of a recession there.
The London FTSE is down nearly 30 points as it follows the trend of the other European bourses, sliding as a result of unexpectedly poor PMI data. Breaking news that Fitch has downgraded Greece to C, with a warning that a default was likely in the near term has sent the DAX lower by 72 points. A bearish sentiment prevails on OpenBook. All of trader anugiu’s several open shorts on the DAX are already showing mid-to-high double-digit gains. This trader, who lost a few copiers over the past few days as some open positions hit their SL, could be on the way to redeeming himself with these solid returns.
Copyright 2012 eToro BlogNote: Past performance is not an indication of future results. This post is not investment advice. CFD trading bears risk to your capital.