Sterling hammered by BoE surprise

Hi everyone,

 

So we built yesterday's BoE meeting as a 'stick or twist' moment for customers with exchanges in the pipeline and the event lived up to the hype. Unfortunately, it wasn't good news for anyone that decided to stick with £. GBP v EUR rates initially climbed back to 1.18 mid-market just before the vote, however 1% was lost just an hour after. 

 

It means the Pound has lost over 2% in value in just 10-days and leaves Octobers 20-month high a distant memory. Onto what happened then and 'toothless' seems to be the main word being used to describe the BoE decision. Analysts had priced in around an 80% chance of a rate hike, but judging by the comments that followed the vote (and the vote itself 7-2), there was almost a 0% chance of a hike happening. 

 

There wasn't much good news to come out of the meeting either with very dovish comments, no rate hike expected until early 2022 and with inflation peaking at 5% next April. Governor Bailey has come under heavy criticism for his tone at the meet after previously coming across 'upbeat' over an incoming rate hike to curb high inflation. It seems as though everything has slightly gone wrong for the Pound ever since the Autumn budget was announced last week.

 

It's hard to tell where this leaves the Pound at the moment because the sole reason for the strong performance in October was down to confidence in a rate hike happening, so it's unclear what the £'s true value is just now. What we can categorically commit to is that no rate hike will be happening in December, as the last time this happened was in 1970..

 

 
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