Pound heads even lower as BoE leaves rates on hold
Philip McHugh December 20th 2019 - 2 minute read

The pound continued to grind lower yesterday, placed on the defensive by a dovish outlook from the Bank of England (BoE).
Sterling appears to be holding its ground so far this morning however, with GBP/EUR stable at €1.1707, GBP/USD subdued at $1.3015, and GBP/CAD flat at C$1.7102. GBP/AUD and GBP/NZD are holding steady at AU$1.8889 and NZ$1.9731 respectively.
Looking ahead, we expect to see parliament pass Boris Johnson’s EU withdrawal bill later today, but following this week’s developments will it be enough to revive the pound?
What’s been happening?
The pound remained on the back foot through Thursday’s trading session following the BoE’s final rate decision of 2019.
While the BoE voted to keep rates on hold again this month as expected, the dissent of two members of the Monetary Policy Committee kept speculation of a rate cut next year front and centre.
Rate cut expectations were further fuelled by warnings from the bank that risks remain skewed to the downside.
Adding to the pressure on Sterling yesterday was a shock contraction in UK retail sales growth last month, stoking fears GDP could stagnate in the fourth quarter.
In the absence of any notable data, the euro was left mostly directionless on Thursday as EUR investors await some fresh impetus for movement.
Meanwhile, the US dollar moved broadly higher yesterday in spite of underwhelming US data, with both the Philadelphia manufacturing index and US existing home sales printing below expectations.
What’s coming up?
Centre stage today we have the vote on Boris Johnson’s EU Withdrawal bill, which is almost guaranteed to pass after Johnson secured an overwhelming majority in parliament last week.
While markets will welcome the passing of the bill on the expectation it will provide investors with more short-term clarity on Brexit, the pound may struggle to find any upside due to the inclusion of a clause which legally blocks any extension to the transition period, something which has proven a major headache for Sterling this week.
For EUR investors the focus will be on the Eurozone’s latest consumer confidence figures, where a slight improvement in sentiment may help buoy the euro.
Closing out the week we have the latest US GDP figures, with the final release of the third quarter figures expected to confirm growth accelerated from 2% to 2.1%, likely helping to support the US dollar through the remainder of the session.
Written by
Philip McHugh