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Pound Sterling (GBP) Exchange Rate Softer after BoE Comments
Published: 19 Mar at 5 PM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates, Inflation, Pound Dollar Exchange Rate,
Wednesday saw the Pound decline against most of its major currency counterparts as the UK published disappointing average earnings figures. The UK’s unemployment rate also failed to decline as expected, putting further pressure on the Pound. However, the data did show that employment had advanced to a record level of 73%. According to industry expert Matthew Whittaker; ‘The level of nominal pay growth remains surprisingly muted given the strength of the employment picture. We will need to see a big step up if we are to see a long overdue bounce in wages this year, as some have predicted.’
The Bank of England (BoE) meeting minutes failed to lend the British currency support as they showed that the nine-member Monetary Policy Committee (MPC) voted unanimously to keep interest rates on hold at the last policy meeting. The central bank also intimated that the strength of Sterling could keep inflation lower for longer and prevent interest rates increasing in the near future. As stated by Sam Hill of RBC Capital Markets; ‘As expected, the evolution of the policy decision discussion prompted headlines to emerge on the strength of the exchange rate in the run-up to the March meeting. In particular, the potential for interest-rate differentials between the UK and the Euro area was cited as one factor which could exacerbate Sterling strength and cause inflation to remain below target for longer. By itself, or even alongside the weaker-than-expected average-earnings data, this is dovish news.’
The Pound recouped losses against the Euro on Thursday as Grexit concerns resurfaced but struggled against the US Dollar following the Federal Open Market Committee interest rate announcement as a June rate hike still appears to be on the cards. The GBP/USD pairing consolidated losses and returned to trending in the region of 1.4737 after the BoE’s chief economist asserted that the central bank is just as likely to issue a rate cut as an increase. Friday’s UK current account data could cause further Pound movement.
The Bank of England (BoE) meeting minutes failed to lend the British currency support as they showed that the nine-member Monetary Policy Committee (MPC) voted unanimously to keep interest rates on hold at the last policy meeting. The central bank also intimated that the strength of Sterling could keep inflation lower for longer and prevent interest rates increasing in the near future. As stated by Sam Hill of RBC Capital Markets; ‘As expected, the evolution of the policy decision discussion prompted headlines to emerge on the strength of the exchange rate in the run-up to the March meeting. In particular, the potential for interest-rate differentials between the UK and the Euro area was cited as one factor which could exacerbate Sterling strength and cause inflation to remain below target for longer. By itself, or even alongside the weaker-than-expected average-earnings data, this is dovish news.’
The Pound recouped losses against the Euro on Thursday as Grexit concerns resurfaced but struggled against the US Dollar following the Federal Open Market Committee interest rate announcement as a June rate hike still appears to be on the cards. The GBP/USD pairing consolidated losses and returned to trending in the region of 1.4737 after the BoE’s chief economist asserted that the central bank is just as likely to issue a rate cut as an increase. Friday’s UK current account data could cause further Pound movement.
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Source: moneytransfer.co.uk