Pound falls AGAIN on BoE comments

21st October 2010
Good morning. The pound has fallen to a new low against the Euro this morning, as the Bank of England chief economist said that there is uncertainty over inflation and the economic recovery. We’ll look at this today, in addition to how the spending review affected rates. First the usual snapshot of rates as at 08:30am:

  • GBP/EUR 1.1267
  • GBP/USD 1.5746
  • GBP/AUD 1.5982
  • GBP/NZD 1.5981
  • GBP/CAD 1.6068
  • GBP/CHF 1.5188
  • GBP/HKD 12.221
  • GBP/JPY 127.63
  • GBP/ZAR 10.868
  • EUR/USD 1.3974

Pound falls on BoE Comments

The comments from the chief economist increase the chance the bank will opt for more Quantitative Easing next month at their November meeting. This seems certain to happen now, and it has been mostly priced into exchange rates. As a result, the GBP/EUR rate is the lowest since April this year.

Bank 3 way split on QE

The Bank of England’s Monetary Policy Committee was split three ways during its October meeting, released minutes have revealed. Seven of its members voted for no change to interest rates and no additional stimulus spending, while one person wanted to see rates rise.

The minutes showed that Mr Posen called for a further £50bn to be put into the QE programme. Meanwhile, it was Andrew Sentance who again voted for a rise in interest rates, the fifth month in a row that he has done so.

The lack of a consensus by the BoE is weakening Sterling, along with the fact most analysts now believe more QE is now inevitable.

Spending Review

You can see a full breakdown of the cuts on the BBC site here. While a big news story, there was nothing in the announcement that wasn’t already expected and so the currency markets were unaffected for the most part. We expected a volatile day for Sterling, however this did not materialise. It’s the QE news that’s affecting Sterling at the moment.

Summary

There’s a cloud of doom surrounding the UK economy at the moment, and for those selling Euros back to Sterling, rates have not been this good for many months. Those buying Euros however should take note of the steady decline in the pound, and contact us to discuss options to make sure you are protected should rates continue to fall.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what’s happening in the currency markets.

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