Forex: Pound to Euro (GBP/EUR) & Dollar (GBP/USD) Rates Climb As BoE Avoids 'Further Guidance'

Modified: Thursday, 1 August 2013 16:01 BST - Written by David Woodsmith

STORY LINK Forex: Pound to Euro (GBP/EUR) & Dollar (GBP/USD) Rates Climb As BoE Avoids 'Further Guidance'

The Bank of England completely wrong-footed the global currency markets at midday today when it published its latest policy decision. Analysts had been anticipating that the UK central bank would once again issue a ‘Forward Guidance’ statement alongside its interest rate / QE announcement and levels of optimism were not high for this release following the negative tone of last month’s counterpart statement. Much of the selling pressure which Sterling has come under during the past seven days has been due to high levels of fear regarding the potential content of this extraordinary missive.

When the BoE’s ‘Forward Guidance’ statement was not forthcoming, the Pound enjoyed a pronounced relief rally which sent the Sterling euro exchange rate back above the 1.1500 threshold. The pair had briefly traded down into the 1.1300s earlier this morning as investors feared the worst for today’s set-piece event. The Pound Dollar exchange rate (currency : GBP USD) has also registered healthy gains in the aftermath of the BoE announcement. The move in favour of the Pound has sent the Sterling US Dollar exchange rate (currency : GBP USD) back up into the mid-1.5200 once again.

Today’s session had already been a relatively positive one for the UK tender even before the central bank announcement thanks to a highly encouraging Purchasing Manager Index manufacturing sector survey which printed at 54.6 versus expectations of a showing of 52.8. With activity levels in UK plants and factories apparently on the up, many analysts have suggested that the apparent policy of talking the Pound down by UK policymakers appears to be having its desired effect in boosting domestic industry. With this in mind, the next Bank of England Forward Guidance statement, which the BoE announced will be published on 7th August, may well prove to be strongly Sterling-negative. This afternoon’s gains for Sterling may therefore prove to be short-lived.

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