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Weekly Roundup: Rising odds of BoE interest rate cut drag pound lower

currency-newsWeekly Roundup: Rising odds of BoE interest rate cut drag pound lower
As BoE Governor Mark Carney warned that the UK economy is not guaranteed to bounce back in the months ahead in spite of the election result, demand for the pound weakened.

Markets were caught off guard by the cautious nature of Carney’s comments, and they drove the odds of an imminent interest rate cut sharply higher.

Subsequent comments from policymaker Gertjan Vlieghe added to the bearish mood of GBP exchange rates over the weekend as he indicated his willingness to vote for a potential rate cut.

The disappointing nature of November’s UK gross domestic product data continued to push the pound lower at the start of the new week, with investors unimpressed by the monthly -0.3% contraction.

Bets on the chances of imminent BoE action could pick up further on the back of the latest consumer price index report.

If inflationary pressure fails to show signs of acceleration in December the case for the BoE to act sooner rather than later is likely to grow, to the detriment of the pound.

On the other hand, a stronger showing from Friday’s UK retail sales figures may encourage investors to show renewed confidence in the pound, provided that consumer spending bounces back on the month.
 
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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