Before the Bank of England published its rate decision the Pound was trading close to a five-week low against the US Dollar and was moderately lower against the majority of its most traded peers.
The Pound Sterling to US Dollar Exchange Rate was in the region of $1.5250 as of 12:30 GMT
1 Euro is currently worth 0.8528 pence
Those declines have now been extended in response to UK news.
With recent UK data painting a positive picture of economic recovery, economists expected the Bank of England’s Monetary Policy Committee to retain its current asset purchase target of 375 billion Pounds and leave the benchmark interest rate at the record-low of 0.5 per cent.
As the BoE gathered one London-based senior currency strategist observed: ‘We think we will get a statement, which breaks with tradition [no policy alterations generally means no economic statement is issued]. We’re not expecting Sterling to react poorly to the fact that we get a statement. The data points to the economy growing, so it’s quite hard for them to justify anything too dovish at this point.’
However, another industry expert was more cautious: ‘UK data has been unambiguously strong recently, but we remain bearish on the Pound. We don’t think better growth numbers will translate into tighter monetary policy. We expect incoming Governor Carney will introduce verbal guidance’.
The GBP/USD exchange rate hit a low of $1.5128
Last month former Governor of the BoE Mervyn Kind asserted: ‘The greater risk [than inflation] at present is that, over the next few years, unemployment remains unnecessarily high. It is too soon to say that the job of securing recovery is complete. There is a powerful case for more stimulus in the short run.’
But the MPC acted in accordance with expectations, leaving both the benchmark interest rate and asset purchase target unaltered.
In a statement published alongside the decision the MPC asserted that the UK’s economic recovery ‘remains weak by historical standards and a degree of slack is expected to persist for some time [and] the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.’
The news saw the Pound immediately fall against the US Dollar and lose ground against peers including the Euro, Australian Dollar and New Zealand Dollar.
While UK data may be exceeding expectations at the moment the BoE still has several hills to climb, such as the rapid decline in underlying inflation, a resurgence of Eurozone concerns and the possibility of the US Federal Reserve tapering stimulus.
In other UK news, data published by Halifax showed that the BoE and government attempts to boost the property market are having an effect as UK house prices climbed to an almost three-year high in June.
Halifax’s housing economist Martin Ellis said of the result: ‘Improved confidence in both the housing market and the economy, combined with a shortage of properties available for sale, appear to be pushing up house prices.’ However, Ellis added that a ‘subdued economic background and weak income growth are expected to remain significant constraints on housing demand.’
Lloyds employment confidence index also climbed from -37 to -33 in June.
Additional movement in the GBP/EUR pairing can be expected to occur following the publication of the European Central Bank’s rate decision.
Current Pound Sterling (GBP) Exchange Rates
< Down > Up
The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5250 <
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1726 <
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.6707 <
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.9545 <
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6558 >
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8528 >
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5995 >
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5097 >
(As of 12:30 GMT)
Comments are closed.