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Pound plummets following dovish BoE rate hike

currency-newsPound plummets following dovish BoE rate hike
The pound tumbled in the face of heavy selling pressure on Thursday, after the Bank of England (BoE) delivered a ‘dovish’ interest rate hike.

Meanwhile, Sterling is mostly subdued at the start of today’s session, with GBP/EUR stable at €1.1873 and GBP/USD muted at $1.3154. GBP/CAD and GBP/AUD have retreated to C$1.6584 and AU$1.7781, respectively, while GBP/NZD holds steady at NZ$1.9071.

Looking ahead, will we see more positive progress in Ukraine-Russia peace talks help to bolster market sentiment today?

What’s been happening?

The pound suffered a sharp sell-off during yesterday’s session, in response to the Bank of England’s latest interest rate decision.

While the BoE raised interest rates back to their pre-pandemic levels at 0.75%, its forward guidance proved more dovish than GBP investors had hoped for.

The BoE suggested that while ‘further modest tightening’ might be necessary, the UK’s economic outlook in increasingly uncertain in light of the war in Ukraine.

The euro, meanwhile, was able to extend its recent gains as markets remained optimistic regarding the current progress of Ukraine-Russia peace talks.

This uptick in EUR exchange rates was also supported by the Eurozone’s latest consumer price index. February’s finalised figures saw inflation revised slightly higher to 5.9%, potentially placing more pressure on the European Central Bank (ECB) to consider raising interest rates.

Finally, the US dollar was left on the back foot yesterday as a prevailing risk-on mood offset a larger-than-expected drop in last week’s US initial jobless claims release.

What’s coming up?

The only economic data of note today will be the publication of the Eurozone’s latest wage growth figures, with a solid bump in earnings in the fourth quarter potentially bolstering the appeal of the euro.

Otherwise, the focus primary focus for most currency traders looks to be on the situation in Ukraine. More positive signals from the peace talks between Ukraine and Russia might help to bolster risk appetite at the expense of the US dollar.
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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