Pound falls after interest rate announcements

By Matthew Vassallo

The Pound’s modest resurgence against the Euro was halted yesterday, following the Bank of England’s interest rate decision and subsequent monetary policy statement.

Whilst the 0.5% hike was widely predicted, BoE governor Andrew Bailey’s subsequent statement served as a stark reminder that the UK’s recent economic plight is far from over.

The central bank was quick to reinforce their dovish predication that the UK economy is likely to face one of the longest recessions on record, as it continues to starve off a crimpling cost of living crisis.

The market’s tepid reaction to this was unsurprising, even more saw when it became that the 9 members of the central bank were far from united in their proposed cause of action.

Whilst six members voted in favour of the confirmed 0.5% increase, one member voted to raise the base rate by 0.75%, while two voted to keep the levels unchanged. Clearly a disjointed approach amongst members of the one institution that is tasked with solving the current economic crisis.

To add further woes, UK Retail Sales figures unexpectedly fell by 0.4% in November. This is highly unusual in the preceding month before Christmas, and only serves to highlight the UK’s current economic stagnation.

The knock-on effect was a sell-off of GBP positions by investors, whose cautious optimism of late was likely erased within a two-hour window yesterday afternoon. The negative trend we saw yesterday afternoon on GBP/EUR was also likely enhanced by the European Central Bank (ECB) raising their base rate by 0.5%, though their outlook for a realigning the level of inflation inside the EU, seemingly offered more optimism to the markets than that of its UK counterpart.

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