The Pound (GBP) went into freefall against the majority of its peers on Thursday as markets reacted to the Bank of England’s (BoE) latest rate decision.
While the Bank voted to raise interest rates following its November policy meeting, the move had largely been priced in already, causing Sterling appetite to cool sharply as the BoE suggested that further hikes were likely to be gradual.
The Pound may cede even more ground later this morning as well, with economists forecasting that the latest Services PMI will show that activity in the UK’s service sector will have slowed in October.
The Pound Euro (GBP EUR) exchange rate plummeted by around two cents yesterday in the wake of the BoE rate decision.
Despite implementing its first rate hike in over a decade, markets fear that the dovish tone struck in the Bank’s accompanying minutes suggests that policymakers are unlikely to raise rates again for the foreseeable future.
Sterling also slumped to a one-month low against the US Dollar (USD) on Thursday as investors fled the Pound when the BoE signalled that yesterday’s rate hike would not be the start of a new cycle of monetary tightening.
Donald Trump’s nomination of Federal Reserve Governor Jerome Powell to be the next Fed chair also lent some support to the ‘Greenback’ yesterday, allowing it to consolidate its gains.
Meanwhile the US Dollar is likely to rocket even higher later this afternoon as economists forecast that October will bring a sharp surge in US Non-Farm Payrolls.
The Pound Canadian Dollar (GBP CAD) exchange rate sank by around three cents yesterday as investors soured on Sterling following the BoE rate decision.
Meanwhile the ‘Loonie’ may seek to further extend its gains later this afternoon as economists forecast that Canada’s latest labour report will reveal that domestic employment continued to tick higher last month.
Sterling fell sharply against the Australian Dollar (AUD) on Thursday as the positive impact of the BoE’s rate hike was undermined by suggestions it would be a one-off.
However the ‘Aussie’ was forced to cede some of its gains in overnight trade when Australia’s latest retail report showed that sales flat lined in September, disappointing investors who hoped that they would have rebounded after declining for two consecutive months.
New Zealand Dollar
The Pound New Zealand Dollar (GBP NZD) exchange rate struck a two-week low yesterday, with the pairing relinquishing nearly all the gains made in the wake of Labour’s election victory, as investors fear that the BoE is likely to leave its monetary policy unchanged for the foreseeable future.