Where is the Pound Going Now

The pound lost about 0.50 percent of its value in comparison to the dollar on Wednesday, February 8. This comes after a few days of steadily rising prices. Midway through Monday the 6th, the GBP stood at just below 1.574 before rising in value up to above 1.592 Early Wednesday. But Wednesday’s trading sessions saw the price drop quite a bit back to the previous week’s value of around 1.581. This is apparently a sign of future things to come.

The pound has been consistently climbing up to levels that it had reached in the three previous months after falling down to almost 1.53 in early January. Since then, there has been steady growth in price, until earlier this week. What just seems to be a minor speed bump, however, is a predilection of future price actions, experts say. There are indications might return to its yearly high levels of up above 1.60, but not for very long.

Back in the beginning of May 2011, the pound had hit its high of the last one year up at about 1.67. Starting then and lasting until the end of September, the pound was in a free fall. October and November saw a rise in price, going from a low of below 1.54 up to above 1.60. From November until the end of January 2012, the price of the British pound once again dropped. But now that the price is once again rising, there is every reason to believe that the pound will once again reach at least 1.60. This will probably only be very short lived, however.

This is partly due to the fact that the European debt relief plan has been taking steps forward. The Bank of England is expected to come forward and raise the Asset Purchase Facility above 275 billion GBP. This would have a positive effect on the Bank of England and allow it to expand its balance sheet. This will also be positive in its effects upon the overall British economy. The English financial experts see that there is a risk of undershooting the 2 percent inflation estimate. As an effect to this cause, it is likely that the GBP will revert back to its 38.2 percent Fibonacci retracement level. It’s estimated that support levels will be around 1.5730 to 1.5750.

 
In summary, the British pound might be looking like it will recover and rise in value in relation to the U.S. dollar, but thanks to necessary actions by the Bank of England this recovery will be very short lived. If you are looking for a long term action to take on the pound, selling it off looks to be a good move, at least for the time being.

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