Pound Sterling Gets a Lift as Additional QE Chances Evaporate

Sentiment on OpenBook for the EUR/GBP, which is at this writing trading at 0.8373, is bearish with short positions outnumbering longs by 2 to 1. Trader PPvijayakumar, who is the go-to guru for this pair, has allocated 100% of his portfolio to the EUR/GBP over the past three months. He currently holds several recently opened short positions, one of which is already showing a profit of 16.5% and has a TP of 0.8272, which is only about 100 pips a way. Other opens long positions would need a strong Euro rally to turn them into a gain, an event unlikely at the present time.

The Pound Sterling, which has seen a downtrend in recent weeks as investors worry over the U.K. economy and the prospect of a double-dip, has gotten a boost from the Bank of England. It appears that the prospects of any additional quantitative easing from the U.K. central bank, above and beyond the recently pledged £50 billion QE, is likely off the table for a while. The Bank earlier released its January inflation forecast and expects that inflation will reach 1.8% within two years. The December report had inflation expectations pegged at around 1.6%, which was higher than November’s 1.3% projections.

The growth outlook is expected to remain somewhat weak, with 3.0% annualized growth forecast within two years, but could strengthen more as households’ real incomes improve. The good news is that the U.K. should be able to skirt a recession, though its symbiotic relationship with the Eurozone could certainly change the dynamics.

Ahead of the Bank of England report, trader padveblo closed out a string of hedged positions in the EUR/GBP pair earlier today, with returns ranging from 15.60% to 94.20%. This trader’s allocation to the pair over the last six months has been nearly 30% of the portfolio, while the recorded gains have been almost 28%.

The BoE expects that inflation will continue to moderate over the long term, but said that energy prices and the affect of the current high unemployment’s effect on industries’ bottom lines were making it more difficult to gauge the pace. Given that, the members of the Bank’s Monetary Policy Committee have wide-ranging view of the impact of those factors.