In the aftermath of the Bank of England's latest interest rate decision, this report looks at what happened to the Pound's value yesterday, and the outlook for the coming weeks. The table below shows the change for a number of GBP currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR3.5%€7,350
GBPUSD2.15%$5,500
GBPCHF4.5%CHF 11,350

To check current exchange rates visit our live foreign exchange rates page.

Interest rate decision – commentary disappoints

Yesterday was a heavily anticipated day with the latest update from the Bank of England (BoE) on interest rates. Before the release the market had heavily priced in an expectation that the BoE would raise interest rates by 0.25% to pre-Brexit vote levels of 0.5%. This price in exercise had heavily supported the Pound’s value, which had climbed to a near 5-month high against the single currency in the build-up.

The BoE did confirm an interest rate hike however they also suggested that rates will now only climb twice more over the next three years. This is widely different from what most had expected, that being that interest rates would now steadily climb in the years ahead.

This news resulted in significant downside for the Pound with rates dropping by nearly 2 cents within a 90 minute period. This highlights again that it is sometimes wiser to trade on the expectation rather than confirmation of figures and indeed to keep in close contact with your broker here for live levels.

Reports of a splintered Tory government

Brexit and Westminster likely to push Sterling down

Moving forward until the end of the year the main driving point for the value of the Pound will probably revolve around politics; both Brexit negotiations and indeed the fragile government in place in Westminster. With the very recent resignation of Sir Michael Fallon on Wednesday there is a risk that pressure may mount on other ministers to resign for any previous misconduct, resulting in a re-shuffle in what is already a rather weak government. Expect this to potentially have a negative impact on the Pound making things more expensive. Brexit will also remain a major talking point. The next main negotiations start in a month and are already being pushed as the final talks, with either progress or potentially a 'no-deal' conclusion.

I personally expect that as with most political negotiations things will get worse before a decision is made, which is likely to have a negative impact on the Pound. Something very much worth considering when assessing the potential future trend for the Pound this month.

Inflation remains key to future Pound value

The next data release for the UK is Tuesday of next week. This is when we expect the latest UK house market information, which has been under considerable strain recently, and also the next inflation report. The inflation report is probably more influential on the value of the Pound as a result of its close ties to future potential interest rate hikes. Especially after yesterday’s update from the Bank of England, this full update could easily impact the value of the Pound. Make sure to get in contact if you have not spoken to us this week if you have any currency exposure this month.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me at hse@currencies.co.uk.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.