UK Hold Interest Rates at 0.5% in Surprise Move

The Bank of England has held interest rates at 0.5%, defying the speculation that rates would be cut by 25 basis points, the decision to keep rates stable was taken overwhelmingly, as the central bank’s Monetary Policy Committee voted 8-1 in favour of there being no change.

In response, the pound has shot upwards, as the GBP/USD rate is now over $1.3378, easily the highest it has been since the decision to leave the European Union (EU).

The Committee voted unanimously to maintain the stock of purchased assets, via their quantitative easing programme at £375 billion.
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In a statement the bank said that ‘A vote to leave the EU could have material implications for the outlook for output and inflation. The Committee judges that a range of influences on demand, supply and the exchange rate could lead to a significantly lower path for growth and a higher path for inflation.’

Societe Generale in their daily forex report said that there is an opportunity, and a need for the UK to counter the post-referendum economic slowdown, with a more expansionary fiscal stance and were that to happen, it would be positive for sterling.

May Factor Stabilises Pound

The appointment of Theresa May as the UK’s new Prime Minister has continued to prevent the pound from plummeting further against the US dollar, appreciating on the greenback this morning GMT, having given previous gains away yesterday evening, in anticipation of a rate cut today.

Last night the pound fell away to buying $1.31, while so far today the pound peaked at over $1.325, before the stable rate was broadcast.

Sterling also fell last night simultaneously with the announcements on who would take up the key positions within May’s new administration, with the biggest surprise that leading leave the EU campaigner Boris Johnson, is now the UK’s foreign minister, in what is viewed by many observers as a major gamble.

As expected Phillip Hammond is the chancellor, replacing George Osborne who was not even chosen to be part of the government team, Hammond has ruled out an emergency budget, and said that his first job would be reassure British business over ‘Brexit’, and to decide how to take forward the renegotiation with the EU.

Other significant appointments are euro sceptics David Davis and Liam Fox as ministers to negotiate the ‘Brexit’ deal, and the newly crated International Trade Office respectively, a clear sign that the Prime Minister is handing responsibility to leave the EU in the hands of those who wanted to walk away from Brussels.

Housing Market Fall Post ‘Brexit’ Says Survey

The Royal Institute for Chartered Surveyors has revealed in their residential market survey for June, that there has been a drop in the level of activity in the UK housing market, since the EU referendum.

New buyer inquiries have dramatically declined, with 36% of surveyors saying fewer people are interested in buying property, the lowest reading since the middle of 2008, with the more expensive south east being the hardest hit.

The market has also seen further decline in sales this month with a third successive monthly drop in activity, more disturbingly contributors expect this trend to continue with 26% more respondents anticipating a further drop in sales across the UK over the next three months, marking the most negative reading for near term expectations since 1998.

House price increases saw a reduction in June, even though prices are rising, the pace of the that growth is now thought to be easing.