"The pound has lost its shine over the course of this month with the Bank of England decision to increase its asset purchase program and last week’s poor government finance figures continuing to weigh heavily. "The only data release of note this week has been the BBA loans for house purchases and despite this hitting a 17 month high, sterling’s fall from grace has continued. Against the dollar, the pound has now lost around 5 per cent from the 1.7040 highs seen at the beginning of the month and 4 per cent against the euro over the same period. "Expectations of future UK interest rate hikes have been pared back following recent Bank of England activity. The market was surprised enough with the additional £50bn of quantitative easing but the minutes of the meeting revealed that three members of the committee, including Governor Mervyn King, voted for a £75bn extension. The inflationary implications together with concern over the affect of exiting this increasing amount of QE look likely to undermine sterling for the time being. "Short term, we can see the pound losing around another 1 per cent of its value with levels of $1.60 and €1.1250 looking like realistic downside targets. The latter would represent a test of the eight-month bull trend but in the case of the dollar, we have already seen the pound break below a five-month trend line which adds further weight to the near term bearish outlook from a technical perspective." Related articlesSterling hits a ten-month highIncreased bank lending is "irresponsible"Alistair Darling gives the banks a whipping Picture source
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