We have a key day for Sterling exchange rates today as we have the Bank of England interest rate decision, meeting minutes and Governor Mark Carney also speaks shortly afterwards.
There are a number of possible scenarios which I will outline below.
- Interest rate cut and a nod to further QE (Quantitative Easing). This will more than likely lead to Sterling weakness this afternoon as although the rate cut is expected and almost priced into the market, more QE would be seen as a negative for the Pound and could cause the rate to drop off.
- Interest rate cut and no QE. I actually think this would give the Pound a boost, again the cut is pretty much priced in but no movement on QE for the foreseeable would be likely to boos the Pound.
- No interest rate cut. I still think this is a possibility however a small one but this would give Sterling strength.
- A cut and then an aggressive stance in the speech on economic policy. We may see a rate cut and then Mark Carney could come up with an aggressive stance on where we head next which would more than likely lead to weakness for Sterling this afternoon.
All in all, I would say there is more chance of Sterling dropping than going up today but I wouldn’t fall off my chair if we finished the day higher than where we are now. The rate cut will not make a huge difference but what is carried out or spoken about around the rate cut will be the most important part to follow is what we see in the minutes from the meeting and what Mark Carney says in his speech shortly after.
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