GBP/USD Daily Candle Chart - 11th March 2009

GBP/USD Daily Candle Chart - 11th March 2009

Yesterday the pound dollar took a breather ending the day with long legged doji candle as it continues to test the 1.35 level.  Looking at the chart we can the testing being repeated in this morning’s early trading as the pound continues to sink against the dollar.  Any significant market volatility may appear in today’s economic calendar at noon when the “fat, inky fingers” of the BOE officially start the process of quantitative easing – printing money to you and me.  With one click they will magically create 2 billion of government bonds, the first step in a massive release of 75 billion in total.  No one, least of all the BOE, the Treasury, Gordon Brown, Alistair Darling or my dog, Bertie, has any idea what effect this will have either on the economy or the British Pound.

As this is a reverse auction the BOE will be buying the securities with the money that it has printed.  The sellers actually determine the price and it is relying on investors such as life assurance companies, pension funds and investment funds to part with their bonds.  The BOE hopes that by buying up these bond will reduce yields thereby making it cheaper for companies to borrow on the capital markets.

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