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Pound bounces as the BoE keeps rates on hold in January

currency-newsPound bounces as the BoE keeps rates on hold in January
The pound shot higher against the majority of its peers yesterday as GBP investors cheered the Bank of England’s (BoE) decision to leave interest rates on hold this month.
 
Sterling has pushed higher again this morning, with GBP/EUR soaring to €1.1915 and GBP/USD rallying to $1.3138. GBP/CAD has advanced to C$1.7372 while GBP/AUD and GBP/NZD have risen to AU$1.9611 and NZ$2.0322 respectively.
 
Coming up today, we might see some volatility in GBP exchange rates as the UK prepares to formally leave the European Union.
 
What’s been happening?

The pound rallied on Thursday, in response to the BoE’s decision to leave interest rates on hold this month.
 
Ahead of yesterday’s meeting markets had priced in a 50% chance that the BoE would opt for an immediate rate cut following a recent run of weak UK economic data.
 
This saw GBP investors relieved when the bank ultimately decided that a cut wasn’t warranted tat this time, with fewer policymakers voting for a rate cut than expected and further boosting the appeal of Sterling.
 
Yesterday saw the euro enjoy some modest support, with the currency firming in response to Germany’s latest inflation and employment figures, both of which suggested the Eurozone’s largest economy could be on the road to recovery in 2020.
 
Meanwhile, the US dollar began to run out of steam on Thursday following the publication of the latest US GDP figures.
 
These revealed growth in 2019 slowed to 2.3%, down from 2.9% in 2018, with analysts sounding alarms about the notable slowing of consumer spending at the end of last year.
 
What’s coming up?

It's been a long time coming but today finally sees the UK officially leave the EU.
 
While GBP investors will be relieved to see the UK exiting in an orderly manner after three years of uncertainty, its likely we could see some volatility in the pound today as traders turn an eye to the future – a no-deal Brexit remains a very clear risk at the end of 2020 if the UK and EU are unable to reach an agreement on trade.
 
For EUR investors, the focus this morning will be on the Eurozone’s GDP estimate, where a possible bump in growth at the end of 2019 could buoy the euro, especially if the accompanying inflation figures also print positively.
 
Closing out this week’s session will be the publication of the Federal Reserve’s preferred measure of inflation, the US PCE price index. Will a rise in the index help to buoy the US dollar this afternoon?
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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