Dollar Weakens Amid Confusion on Bank of England Stance
12 Oct 2022
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Dollar Index is trading down 0.02% at 113.10
The dollar weakened in early trade on Wednesday in Europe, amid confusion over the Bank of England’s willingness to carry on supporting a U.K. bond market that has emerged as a key pressure point in the global financial sector.
By 03:30 ET (07:30 GMT), the dollar index, which tracks the greenback against a basket of six advanced economy currencies, was down 0.1% at 113.15, edging lower as some traders bet on the Bank of England being forced to extend its outright bond purchases past its self-imposed deadline of Friday.
Bank of England Governor Andrew Bailey had said on Tuesday – with unusual candor – that pension funds had three days to sort out their current positions, sending the pound sharply lower. However, it recovered most of its losses after the Financial Times reported that Bank officials had privately briefed City bankers that it may after all extend that deadline.
The confusion left GBP/USD at $1.1021, up half a percent from late Tuesday in the U.S., but with the market on a knife-edge as it awaits more clarity.
Data showing that the U.K. economy shrank in August hardly helped the mood, with developments in manufacturing, services and construction all worse than expected during the month.
Simon French, chief economist with Panmure Gordon, tweeted that Bailey’s comments did nothing more, in essence, than repeat the Bank’s press release from a day earlier. That had set out a switch from outright purchases of Gilts to lending operations that have a more manageable impact on the money supply, and consequently on inflation.
On technical fronts Dollar Index: RSI stood at 40.88 and currently it is trading above all MA. So, BUY position can be taken with following target and stoploss: