Pound Euro Exchange Rate Slides into the 1.2000s ? Further Losses Forecast

Published: Tuesday, 19 January 2016 15:30 BST - Written by Frank Davies

STORY LINK Pound Euro Exchange Rate Slides into the 1.2000s ? Further Losses Forecast

Pound Sterling Exchange Rates Slumped Following Carney Comments

Bank of England (BoE) Governor Mark Carney spoke earlier today and support for the Pound Sterling (currency : GBP) slumped as a consequence. Carney stoked investors’ expectations regarding a potential UK interest during the middle part of last year when he hinted that his Bank might tighten its monetary policy ‘around the turn of the year’.

The news sent the Pound higher against the other sixteen most actively traded global currencies and the Pound euro exchange rate spiked to a fresh 7 ½ year high in the middle part of the 1.3000 – 1.4000 trading range.

However, investors’ expectations regarding a UK rate hike have ebbed during the intervening period as Carney and his policymakers changed their tune.

The BoE Governor explained during a setpiece speech at Queen Mary University of London earlier today that, ‘last summer I said that a decision as to when to start raising Bank rate would likely come into sharper relief around the turn of the year.’ He went on to assert that, ‘the year has turned and, in my view, the decision proved straightforward - now is not the time to raise interest rates.’

Carney States that Bank Rate Rises 'Cannot be Pre-Ordained'

Carney went on to explain his rationale by observing that, ‘it is clear to me that since last summer, progress has been insufficient to warrant a tightening of monetary policy. The world is weaker and UK growth has slowed. Due to the oil price collapse, inflation has fallen further and will likely remain low for longer.’ He summed up the situation by stating that, ‘it has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for Bank rate rises cannot be pre-ordained.’

Investors did not like the tone of Carney’s comments and shifted wholesale out of Sterling-denominated assets. The upshot saw the Pound Sterling euro exchange rate slump into the 1.2000s for the first time since last January. Analysts forecast that there could be more downside to come for the pair if it appears likely that the UK will be exiting the European Union.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts Pound Sterling Forecasts