Will the Pound Rise again after Bank of England Predicts Prolonged Recession and Lower Interest Rates?

Pound to Dollar Rate Drops to One-month Low

The pound has been lower following the Bank of England announcement to raise interest rates by 75 basis points. This is actually counter intuitive, since typically, a rise in interest rates will strengthen the currency concerned.

The reason sterling has dipped, is that this record 75 basic points rise was actually predicted to take place, and therefore the market had ‘priced’ it into their calculations and assessment of the market.

Expectations ahead for the pound are now lower, with the Bank of England less likely to raise interest rates as high as previously predicted, and following their outlining of a deep and prolonged recession.

The pound could be in for some more turbulence if the economic outlook is now likely to deteriorate, there was already a fair amount of negative sentiment towards the UK’s economic outlook and this latest assessment from the Bank of England is unlikely to majorly alter the course for the pound.

Looking to the future, Rishi Sunak’s Autumn Statement scheduled for the 17th November could be an important time in the market. Investors will no doubt be monitoring this carefully for any signs of a change in policy, that might lead to a shift for the pound.

One of the key points for investors will be the extent to which Rishi plans to tackle the UK’s debt, and comes up with a plan to balance the books, in terms of UK government spending and taxation.

The markets have been more reassured lately that the present government is going to be more capable than the previous administration, of handling the UK’s economic situation. The pound dropped significantly when Liz Truss and Kwasi Kwarteng announced their mini-budget, it will be interesting to see just what direction the pound will take at the coming Autumn Statement.

If you have a transaction planned involving the pound, and wish to discuss the latest outlook and forecasts then please contact me.

Thank you for reading and I look forward to hearing from you.

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