Speculation about quantitative easing undermines the pound against the aussie

The Australian dollar gained back most of its recent days losses against sterling yesterday, after BoE Governor Mervyn King stated that the central bank was ready to ease interest rates further as well as being willing to take unconventional measures to help revive the British economy. He also mentioned the bank would discuss 'quantitative easing', which is essentially buying assets to boost the money supply. Earlier the bank inflation report showed inflation forecasts had been revised down sharply. Despite the likelihood of further rate cuts the BoE now has very little to play with in terms of reducing rates, which has had the market speculating that the use of non-conventional methods is now much more likely. Quantitative easing is likely to help resolve some of the key issues in the market, however it is likely to have a strong negative impact on the pound.