The British pound today plunged to new lows after the Bank of England left its rates unchanged, while cutting the UK’s growth forecasts for this year. The pound hit new lows against the US dollar after the speech by the BOE Governor, Mark Carney, which painted a dovish economic outlook in relation to Brexit.
The GBP/USD currency pair hit a yearly high of 1.3269 before the sharp drop witnessed after Mark Carney’s speech, which led to the pair losing over 140 points.
The BoE’s Monetary Policy Committee voted 6â2 in favor of maintaining the current interest rates, which markets interpreted as a signal that a rate hike would not happen this year. The BoE left its rate decision at 0.25%, while its asset purchase program was maintained at £435 billion. The British pound had rallied higher after the release of positive Markit/CIPS UK services PMI, which came in at 53.8 versus the expected 53.6. The Markit/CIPS composite PMI also beat expectations by coming in at 54.1 versus teh market consensus of 53.8.
The BoE downgraded its growth forecasts for this year to 1.7% from the previous 1.9% expectation. However, the bank stated that short-term inflation was expected to remain around 2.75%. This would put increased financial stress on British consumers whose real wage growth has declined significantly, according to the Office for National Statistics.
The future performance of the British pound is likely to be affected by the results of the ongoing Brexit talks, especially the preliminary Brexit deal.
The GBP/USD currency pair was trading at 1.3114 as at 14:02 GMT having dropped from a high of 1.3269. The GBP/JPY was trading at 144.49 having declined from a daily high of 146.80.
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