Will the Bank of England Cut Interest Rates This Month and the Impact on Pound Euro Exchange Rates

Italian Quarantine to Weigh on EUR as BoE Announces 50bps Rate Slash

Pound Euro Hits Lowest Point in 3 Weeks

The Pound has started the week off by falling against the Euro in early morning trading. It appears as though there is a an increased appetite for the Bank of England to consider cutting interest rates.

Over the weekend in an interview in the Financial Times, Bank of England external member Gertjan Vlieghe, claimed that he has offered his ‘conditional’ support in favour for an interest rate cut in the near future.

However, this is only if the economy shows a lack of improvement in the period after the election.

This view coincides with both the Bank of England governor Mark Carney as well as MPC member Silvana Tenreyro who have both been rather dovish in their recent commentary.

Rumours of a rate cut has seen the Pound fall across the board and in particular vs the Euro with GBPEUR exchange rates now at their lowest point since just before Christmas.

Negative Economic Data Causes Problems for Pound Euro Rates

UK economic data published this morning came out a lot lower than expected which reinforces this view for an interest rate cut.

Industrial and manufacturing production data came out lower than expected but the real concern was that caused by UK GDP figures.

GDP figures released for November showed a drop to -0.3% against the expectation of 0%.

With so much negative data to start the week I think the Pound could come under further pressure as the week progresses.

The Bank of England are due to next meet on 30th January so if rates are cut this could cause problems for Sterling exchange rates.

The central bank has previously warned that a Brexit deal could hit growth. Therefore, has GDP fallen as the economy is preparing for Brexit?

The next MPC member to talk openly on the subject is Michael Saunders. He is due to speak on Wednesday so any signs of him wanting to also cut interest rates could see the Pound fall further against the Euro.

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