bank of england

Bank of England indicate rate cut

8th November 2019 Market Update

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🇬🇧 GBP –  With the UK elections firmly underway we now see parties publish their campaigns to for the battle of leadership of the nation. A recent poll still has the conservative party in the lead, however that has dropped over that last few days by 11 points.

Sterling came into play again yesterday after hitting one-week lows vs dollar as markets temporarily shifted its focus to the Bank of England policy meeting. The BOE decided to keep interest rates unchanged at 0.75% and gave a loose speech on their forward guidance. With growth slowing down in the UK and abroad, inflation is still not at its 2% target. Therefore, lowering interests wasn’t a sensible choice. Despite this the pound reacted as two MPC members did vote for a cut highlighting the demand for a decrease. Any losses against the euro quickly backtracked as Carney believed Brexit can cause a stimulus for UK companies to buy.

🇪🇺 EUR – The European economy has released its seventh consecutive year of growth and is forecasted to continue expanding in 2020 and 2021. The European commission released yesterday that labour markets remain strong and unemployment continues to fall. However, the external environment has become much less supportive and uncertainty is running high. As a result, the European economy looks to be heading towards a protracted period of more subdued growth and muted inflation. Regardless of this, the euro still lost ground against a strong dollar.

🇺🇸 USD –  The dollar gained against safe-haven currencies such as the yen and Swiss francs as the Chinese commerce minister suggested that the two largest economies are closing the gap of a trade deal to be completed. The bucks strength was primarily prompted by investors preparing to purchase riskier assets off the back of a potential deal being agreed.

 

Summary:

GBP: Two members of BoE vote to cut interest rates
EUR: Euro continues to lose ground
USD: Safe haven status keeps dollar demand alive


 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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