Pound falls in anticipation of BoE Monetary Policy Decision

29 July, 2016

Grace Rae

Since the announcement of the brexit the pound fell dramatically against most major currencies but had since improved and remained fairly steady as the UK’s political situation stabilized and the Bank of England refrained to change any policy actions during its July meeting.

That bounce back was however put on hold as the UK’s PMI surveys posted results significantly under expectations and the worst figures since the last recession seven years ago. Following that poor result, Martin Weale – a monetary policy committee member at the Bank of England who had previously said that the Bank was ‘not a nurse to markets’ and there were no signs that consumers or business were ‘panic-struck’ following the Brexit vote. He has now made a U-turn on that stance and now supports immediate stimulus. This turnaround has sparks worries that the Bank Of England are likely to cut Interest rates in this Augusts’ meeting, and yesterday we saw the GBP-EUR continue its downward journey as we enter the last trading day of the month. The continuous depreciation of the Pound throughout the day could well be a result of investors anticipating that the Bank of England will lower interests rates this coming Thursday. It will be the first time the rates will be lowered since 2007.

Overnight the Bank of Japan announced their latest interest rate decision (safe haven currency) as the Yen has seen so much investment in recent times it was expected that the Bank of Japan would have cut rates from -0.1% to -0.2% in a bid to reduce the pressure on their exports. However, they have in fact remained unchanged at -0.1%.

Today’s main data releases to note are for the three majors. This morning GBP Consumer Credit and Mortgage Approvals at 09:30 followed by EUR Gross Domestic Product for Q2, EUR Unemployment rate, and Consumer Price Index at due at 10am. The afternoon focuses on the US, with their Q2 Gross Domestic Product, and personal consumption expenditures prices at 1:30pm.

If you are looking to buy Euros don’t get stung with any further potential loss on Thursday and get in touch with your broker here at currency index to discuss your options to secure your currency ahead of the decision.
As always if you have an upcoming requirement please do call in and speak to one of our brokers to see how we can assist an help you secure your currency.