The GBP/USD currency pair dropped significantly during today’s session after the announcement by the Bank of England that its inflation outlook and interest rates remains the same. The currency pair started the day’s session trading sideways, but went on to lose most of its gains from the previous session as the BoE’s announcement triggered a selling frenzy around the British pound.
The currency pair lost about 100 points after the BoE’s announcement that it would be maintaining the same monetary policies that were implemented after the Brexit referendum.
The selling pressure on the sterling pound was mainly triggered by Mark Carney‘s announcement that the higher inflation figures were the result of a weaker pound, hence, the BoE would not adjust its monetary policies. The BoE also updated its growth outlook for the next three years, and the outlook for 2017 was raised to 2% from the earlier figure of 1.4%
The cable was also negatively influenced by the dovish outlook taken by Mark Carney as he said that Brexit could have either positive or negative impact on the British economy and that the BoE was ready for any outcome.
The currency pair is likely to be affected by future rate hikes by either the Fed or the BoE given that the FOMC meeting yesterday did not result in a rate hike in the USA.
The GBP/USD currency pair was trading at 1.2535 as at 16:25 GMT having fallen from a daily high of 1.2704 prior to Mark Carney’s statement. The EUR/GBP was trading at 0.8612having risen from lows of 0.8499 before the announcement.
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