Pound Sterling GBP Forecast Dims Following Bank of England Comments

November 24, 2015 - Written by John Cameron

STORY LINK Pound Sterling GBP Forecast Dims Following Bank of England Comments

Pound Sterling (GBP) Declines after BoE Officials Faced Treasury Select Committee

Senior members of the Bank of England (BoE) monetary policy committee faced questions from the UK Parliament’s Treasury Select Committee this morning and the fall-out is forecast to weigh down the Pound Sterling (currency : GBP) into the medium term.

The British asset softened against nearly all of its rivals on Tuesday in the immediate aftermath of the questioning from the Treasury Select Committee.

Dovish BoE Chief Economist Andrew Haldane Weighs on Sterling Demand

Comments from the Bank’s Chief Economist Andy Haldane were of particular concern to investors holding Sterling-denominated assets.

Prior to Haldane’s words, investors had viewed it as a case of ‘when’ and not ‘if’ UK interest rates will be heading Northwards.

However, the senior UK policy setter threw a fair-sized spanner into the works earlier today when he asserted that, ‘given the balance of risks, I have a neutral stance on the future direction of monetary policy.

In my view, policy needs to be poised to move in either direction in the period ahead, depending on how the data and risks, domestic and international, play out.

When rates do rise, I expect any rises to be both gradual and limited, in line with the Committee’s guidance.’

The mere suggestion from Haldane that the BOE monetary policy committee’s next move might be an interest rate cut hit the Pound hard, sending the GBP EUR exchange rate down to an intraday low of 1.4160, while the Pound Sterling US Dollar exchange rate dipped down to as low as 1.5080 GBP USD as market participants priced-in the potential for a divergence of policy paths from the BoE and the US Federal Reserve.

BoE Governor Mark Carney Gives Sterling Moderate Support

However, the Bank’s Governor Mark Carney adopted a slightly more Sterling-positive stance, confirming to the assembled MPs that his organisation is committed to maintain its Quantitative Easing programme at £375bn until domestic interest rates touch 2.0%; given his earlier confirmation that when they come, interest rate increases will be gradual, this could be some time off.

Nevertheless, the general consensus amongst analysts is that today’s events have dimmed their Pound Sterling forecast moving forward.

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TAGS: Pound Sterling Forecasts