Market Snapshot – Pound Falls on Bearish BOE
Pound Suffers Due to BOE
The star of the day has been the pound as the spotlight was fully focussed on the currency since the beginning of the day. If the focus was on the dollar yesterday, it was on the pound today with the BOE rate announcement, statement and also the press conference from the BOE Governor Carney. A combination of these events was likely to keep the pound under a lot of volatility and this did happen post the announcement. The BOE did announce the hike in rates that most of the market had expected. Under normal circumstances, this would have been a boost for the pound and it would have moved up on a strong note but the BOE also lowered their growth forecasts.
BOE Lowers Outlook
They did agree that the Brexit process was beginning to take its toll on the UK economy and making it difficult for the economy to achieve the targets that the BOE had for it. This kind of bearish outlook to the economy caused a large fall in the pound which dropped by over a cent to the lows of the 1.31 region and it continues to trade there as of this writing. What such an outlook effectively means is that the next rate hike is going to take a long time coming and probably there will be only one for the whole of next year. This is likely to disappoint the markets and the pound is likely to suffer in the short term.