Pounds woes continue amidst hints of further QE

10 August, 2016

Matthew Boyle

As markets still digest the Bank of England rate cut announced last week, it hasn’t been a particularly good week for the Pound so far. Following a quiet start to the week in terms of data, yesterday saw the pound suffer further losses as the NIESR GDP estimate released in the morning showed a contraction from a previous figure of 0.6% to 0.3%. This combined with dovish comments from the BoE Monetary policy committee member Mc Cafferty (who is usually hawkish in his outlook) only add to the pounds woes and throughout the day lost almost a cent against EUR and around half a cent against USD. He stated that more Quantitative Easing would be required if the UKs economy declined further, stating in the Times that “the bank rate can be cut further, closer to zero, and quantitative easing can be stepped up”. Whilst he did suggest a more gradual approach would be taken as we are yet to see the full effects of the referendum result, this clearly leaves the door open for more monetary easing in the coming months. As such those of you with upcoming requirements may like to consider you options for securing currency now as further easing or Q.E will only see rates drop further.

Today is again as quiet day in the way of data with the focus on AUD. Early this morning we saw Glenn Stevens give his last speech as RBA Governor before being succeeded by his current deputy Philip Lowe. In it he implored the government to take on more debt and spend on worthwhile projects, whilst also warning about pushing interest rates too low and the danger of banks not passing them on to the consumer, something Mark Carney avoided in last week’s BoE cut. Whilst we do have a number of low-key releases from Europe and the US, the main focus of the day will be this evening on the New Zealand Dollar (NZD) when RBNZ release their latest interest rate decision and monetary policy statement.

Those of you with transfers on the horizon may like to speak to your Currency Index broker today if you have any upcoming requirements you would like to discuss, in what is currently a very volatile market.