The risk on sentiment favoured the pound early on the week with investors increasing holdings on hopes that Greece would resolve the issue with its private investors.
The rally that began on January 16 has lifted the pair above the 1.5700 level, with technical indicators suggesting a continuation in the upward direction.
However, the gains were limited after Adam Posen, a BoE policymaker, spoke about a possible QE expansion at the central bank’s next meeting in February. These additional asset purchases would depend on the updated growth and inflation forecasts, Posen added.
A worse than expected fourth quarter GDP data reversed some of the gains by mid - week and supported the need for additional QE.
After increasing the asset purchase program by GBP75 billion in October, some MPC members are voting for another expansion to prevent inflation from falling below the targeted levels, as the country tries to prevent sliding into a shallow recession.
Near the end of the week, the pace of appreciation slowed marginally with market sentiment continuing to be the driving factor for the pair.
In spite of worrying about the final outcome in Greece; demand for risky currencies kept on growing at the expense of the greenback.
Courtesy: CPM Group for DGCX
