British Pound Lower as BoE Member Talks Additional Rate Cuts, Quantitative Easing

The British Pound traded lower after a Bank of England policymaker said that more quantitative easing was probably necessary if the U.K.’s economic decline worsens. Ian McCafferty, an external member of the Monetary Policy Committee wrote in an op-ed piece for the Times that the “Bank rate can be cut further, closer to zero, and quantitative easing can be stepped up.”

The GBP/USD broke to 1.2955 after the news, before moving back to 1.3004, down 0.0036 or -0.28%.

Last week, the BoE cut interest rates 25-basis points to 0.25% and announced a stimulus package equal to billions of Pounds in an effort to cushion the economic shock from Britain’s vote to leave the European Union.

The EUR/USD rallied on mixed U.S. economic news. This also drove the U.S. Dollar lower against most major currencies. The NZD/USD was trading higher despite expectations of a 25-basis point interest rate cut by the Reserve Bank of New Zealand on August 11.

In U.S. economic news, second-quarter U.S. productivity fell unexpectedly by 0.5 percent. Traders were looking for a gain of 0.4 percent. Wholesale inventories for June rose 0.3 percent, with economists expecting an unchanged reading.

September Crude Oil was up about 0.33% or $0.14 at $43.16. The catalyst behind the rally was the scheduling of an “informal meeting” between OPEC member countries on the sidelines of the International Energy Forum in Algeria next month.

December Comex Gold futures rallied on Tuesday after the U.S. Dollar retreated. Concerns over the global economic outlook also helped support gold prices while expectations that the U.S. Federal Reserve could raise interest rates later this year dimmed.

U.S. stock index futures moved higher on Tuesday with the S&P 500 Index and NASDAQ reaching new all-time highs. Talk of additional stimulus from the BoE helped support the rally. Investors are looking for return and yield and cannot find it anywhere other than the stock market.

Sentiment is risk on with investors driving the Dow Jones Industrial Average up about 50 points. The benchmark S&P 500 was up about 6 points and the NASDAQ rose more than 0.4 percent.

Stock traders are also watching closely the CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market. It is trading around its lowest levels in a year. On Tuesday, the VIX traded more than 2 percent lower, near 11.2.