The pound came under extreme pressure yesterday during one of the most interesting interest rate decision to hit the markets for years. The new Governor of the Bank of England Mark Carney completely changed tactics compared to his predecessor Sir Mervyn King. It seems to be a first from what I can recall where the Bank of England are feeding the markets an insight into their future stance on rate decisions and monetary policy. The Bank kept interest rates on hold at 0.5% and did not initiate any further QE. Mark Carney seems very keen on this forward guidance and yesterday it caused the pound to blow up when they hinted that interest rates will remain at rock bottom for longer than expected and a tightening of policy is not warranted at present. Does this mean that QE (where the bank print more money) is around the corner in August? If you are concerned and have a requirement feel free to contact me at [email protected]
The above sent shock waves through the market for sterling and we witnessed big declines against all major currencies within minutes of the decision. I feel the trend will continue today and well into next week. Sterling is already down at 1.5015 against the USD and 1.1650 against the Euro. We actually hit a low of 1.1580 against the Euro yesterday but the ECB then released their interest rate and press conference shortly after the UK and the pound recovered by half a cent or so.
I have been stating for a while that Mark Carney will be happy for the pound to remain weak to entice overseas investment. This is a way that the UK economy can start to move in the right direction again. His forward guidance will certainly cause interest rate decision days to be more volatile than in the past. The next key release for the Bank will be the minutes released in a couple of weeks where we will see exactly how many members of the Bank voted for interest rate changes and QE.
We can use what happened yesterday to see how rates for the pound can change so quickly. Most analysts were not expecting much of a change for sterling yesterday so the big declines could have hurt if you did not secure your funds prior to the release. Next week will certainly be another volatile one with key economic releases from manufacturing & industrial production to housing stats and the big release will be the GDP figures. All are out on Tuesday bar the housing stats which are released on Monday.
If you have a need to buy or sell the pound against any major currency then feel free to contact me at [email protected] regarding our outlook for the pound. If I know what your requirement is I can explain the options that are available to you to help you time your exchange. Our rates are significantly better than the high street banks too and the personal service is what sets us apart from our competitors. Just email with your requirement and contact details and I will come back to you as quickly as I can.
Thank you for reading and have a good weekend.