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Pound Sterling (GBP) Exchange Rates Lower after BoE Comments

September 15, 2016 - Written by Minesh Chaudhari

Pound Sterling to Euro (GBP/EUR) US Dollar (GBP/USD) Exchange Rate Fluctuates on BoE Statement



Pound Sterling exchange rates struggled on Thursday, with GBP falling vs the EUR and USD.

This afternoon’s session brought the latest Bank of England (BOE) monetary policy decision and there has been some price action for the Pound as a result. Analysts were almost universal in their prediction that, following last month’s interest rate cut and extension to Quantitative Easing, the Bank would unanimously vote to leave its policy on hold this month and they were proved correct.

Prospect of Further Easing to Weigh on Pound Sterling (GBP) Exchange Rates



Despite the lack of action, GBP dipped across the board, falling vs EUR, USD, AUD and NZD.

However, the general tone of the statement which was released at the same time as the decision is forecast to suppress support for the Pound in the short to medium term. The MPC missive clearly stated that, ‘the Committee will assess that news, along with other forthcoming indicators, during its November forecast round,’ before going on to forecast that,

‘If, in light of that full updated assessment, the outlook at that time is judged to be broadly consistent with the August Inflation Report projections, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of this year.’

The Bank went on to note that its, ‘MPC currently judges this bound to be close to, but a little above, zero.’

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Pound Euro, US Dollar Downtrends Continue - New Lows Ahead?



The Pound Sterling to Euro (GBP/EUR) exchange rate fell to a low of 1.1703 during the European session.

It is highly unusual for the BoE to pre-judge its future policy decisions, so today’s near pre-announcement of a cut in Base Rate from its current record low of 0.25% to around 0.10% at either its November or December meeting is anticipated to trigger a move down into the 1.2000s for the Pound Sterling US Dollar exchange rate sooner rather than later. Meanwhile, the Pound euro exchange rate could well slide down to a fresh multi-year low below the 1.1400 GBP EUR threshold.

However, this afternoon’s BoE decision wasn’t all doom and gloom for Sterling; the statement also noted that,

‘In light of the tendency for survey indicators to overreact to unexpected events, the Committee expected some bounce-back in surveys of business and consumer sentiment following the sharp falls in the immediate aftermath of the vote to leave the European Union. Nevertheless, since the August Inflation Report, a number of indicators of near-term economic activity have been somewhat stronger than expected. The Committee now expect less of a slowing in UK GDP growth in the second half of 2016.’
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