Sterling’s recent rally against the Euro was halted yesterday when Ian McCafferty, a member of the Bank of England Monetary Policy Committee, made markets nervous by discussing even the minor possibility of a rate cut.
Of the 9 members of the MPC, he was the only one advocating an immediate rate hike in the British economy. His off the cuff remarks to a journalist yesterday have really hit home the point that even the most staunch supporter of a rate hike is concerned that a slowing global economy may cause a necessary rate cut in the future.
Despite a headline £30bn trade deal between the UK and China announced this morning concerning nuclear power stations, the recent string of poor data coming out of an economy which used to account for 40% of global growth clearly has a greater sway on Sterling exchange rates. These deals with the UK won’t even deliver any benefit to the economy until post-2020.
From being close to 1.37, rates are now oscillating above and below 1.36 with the McCafferty news.
Markets are now looking forward to tomorrow’s ECB interest rate decision and monetary policy press conference. The interest rate decision itself is a non-event, as rates are already at 0.05% and cannot get lower. Markets are waiting for the announcement of further Quantitative Easing in the European economy, which seems inevitable at this point.
However, it seems that most analysts are expecting this to be announced at the December meeting. I expect some further Euro weakness because Draghi will be hinting at further QE in a few months time. He will be unable to dodge questions that is on the tip of the markets tongue, but the weakness will not be extensive as its likely nothing firm will be put forward.
I strongly recommend that anyone with Euros to buy should contact me on 01494 787 478 and ask the reception for Joshua to discuss a strategy on how to buy at any highs that emerge from the meeting tomorrow, and to receive a competitive quote on your transfer. [email protected]