Sterling weak ahead of Bank of England meeting

Good Morning. Sterling is still very weak in the run up to the Bank of England policy announcement tomorrow. Also weighing on the pound was political uncertainty, with polls showing the Conservatives lead is narrowing, increasing the chance of a hung Parliament when the election comes. At 08:30am rates are as follows:

  • GBP/EUR 1.1473
  • GBP/USD 1.6042
  • GBP/AUD 1.8043
  • GBP/NZD 2.2514
  • GBP/CHF 1.6912
  • GBP/ZAR 11.894
  • GBP/HKD 12.456
  • GBP/JPY 144.69
  • GBP/NOK 9.3459
  • EUR/USD 1.3978

Bank of England
The BoE is expected to signal a pause in quantitative easing tomorrow by refraining from increasing its £200 bn asset buying programme. However, analysts say confirmation will be needed before sterling can push higher. That’s the reason we’ve seen no gains this week.

Although a pause is broadly expected, investors were wary, particularly after the recent weaker than expected fourth quarter UK gross domestic product data. This showed that the UK only just grew in the last quarter by only 0.1%.

GDP has been disappointing. There is a question mark over QE and this week we’ve had a poll shift. Clearly the risk of a UK sovereign ratings downgrade is on the radar and I am sceptical that sterling can make gains until the polls turn around,” said Gavin Friend, currency strategist at nabCapital.

“Sterling should probably be weaker heading into the QE risk, it should be trading at around 88 pence to the euro (€1.1360) but we’re getting there, helped by the opinion polls,” he added.

Protecting against adverse movements
If they do pause QE, expect the pound to rise. If the increase the amount, then Sterling will tumble. Whether you are buying or selling a currency with Sterling, then rates could move either in your favour or against you. It’s times like this that