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Pound pulled down by Bank of England decision

Published: Friday 08 November 2019

The Pound has faltered following the Bank of England (BoE) vote – the 7-2 vote to leave interest rates at 0.75% came as a surprise, as Monetary Policy Committee Members (MPC) Saunders and Haskel voted for a rate cut. That is a clear sign of the economic uncertainty being felt by policymakers and this was reiterated by Governor Mark Carney in his commentary afterwards, when he said that a rate cut would be an option if the global slowdown continued and if there was further Brexit uncertainty. This lack of confidence meant that the Pound disappointingly dipped below 1.28 against the US Dollar.
Euro suffers under own economic woes
Europe also has economic worries and this was reflected in the EU downgrading its growth forecasts – this is weighing on the Euro, which is struggling against not only domestic economic concerns but the effects of Brexit and other trade negotiations. The latest German export data was positive, showing a welcome bounce back in a 1.5% increase for September on the previous month, but this good news is hampered by signs of stagnation in the German economy, a critical component in the EU’s economic success, so this has done little to help the single currency.
US Dollar stronger on hopes of US-China trade deal
Meanwhile, the US Dollar has strengthened against most of its key currency partners on optimism that a trade deal between the US and China could be close. The markets took note and equities soared, with the Dow Jones Industrial Index reaching record highs. US Michigan Consumer Sentiment data is due this afternoon and this will be a good indicator of US economic health. It could support the US Dollar to strengthen further.
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Canadian Dollar could move on employment data later
Canadian labour data later will also be released today, so brace yourself if you are buying or selling Canadian Dollars. The Canadian Dollar is feeling the weight of US Dollar strength, but market sentiment is mixed – the trade deal optimism is good for the Canadian Dollar, but this is no match currently for the rising US Dollar in the more risk-friendly markets.


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