Pound Sterling Plummets after Bank of England (BoE) Cuts UK Growth Forecasts

Published: 10 May at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Greece, Italy,

Pound Sterling (GBP)

The Pound has been one of today’s biggest currency losers, having dropped by -0.5% against the US Dollar and -1% against the Euro, in addition to seeing greater losses against other peers.

This poor performance comes after Bank of England (BoE) policymakers voted to leave interest rates at 0.5% at their latest monetary policy meeting.

Economists had been forecasting a rate hike to 0.75% as recently as April, but a steady stream of poor UK data releases caused a change of outlook.

Today’s interest rate freeze was not especially shocking, but downgraded BoE growth forecasts for 2018-2020 dragged on the Pound and panicked GBP traders.

The next UK economic data may cause a Pound recovery, when unemployment rate and wage growth stats are released on Tuesday.

The jobless rate is expected to rise, but a forecast-matching acceleration of the pace of wage growth could restore hopes for a Bank of England (BoE) interest rate hike in June.

Euro (EUR)

As with most other currencies, the Euro has advanced against the Pound today but has also risen by 0.4% against the US Dollar.

The latest Eurozone news has been relatively low-impact – the Greek unemployment rate rose in February, but March’s Italian industrial output stats showed above-forecast growth.

This week will close with a speech from European Central Bank (ECB) President Mario Draghi on Friday afternoon.

Mr Draghi may not touch on the subject of monetary policy, but if he does give some positive forward guidance then the Euro could appreciate before the weekend.

US Dollar (USD)

Despite US inflation rising in April, the US Dollar has only managed to advance against the weakened Pound today; elsewhere a -0.4% drop against the Euro has been seen.

This poor overall performance may be down to the fact that US inflation growth was below forecasts for the monthly reading.

Additionally, Federal Reserve official Raphael Bostic recently stated that even if inflation regularly exceeds the Fed’s 2% target, he may not feel an immediate need to react and raise interest rates.

US Dollar losses could continue on Friday when a University of Michigan consumer confidence estimate is released.

This is tipped to show a minor decline in consumer sentiment levels, which might lower confidence among USD traders.

Australian Dollar (AUD)

With the US Dollar declining today, the Australian Dollar has found itself in high demand and has risen by at least 0.3% against the Euro, Pound and US Dollar.

A devalued US Dollar increases risk sentiment among traders, who can then turn to currencies like the Australian Dollar.

The next Australian economic data that might affect the AUD will be minutes from the Reserve Bank of Australia (RBA), out on Tuesday.

The minutes could improve Australian Dollar trading or worsen it, depending on whether the document shows an optimistic or pessimistic economic forecast.

New Zealand Dollar (NZD)

The Pound hasn’t been the only currency damaged by central bank news today, with the New Zealand Dollar also struggling after a Reserve Bank of New Zealand (RBNZ) event.

RBNZ Governor Adrian Orr was largely dovish in his latest policy speech, stating that NZ inflation levels aren’t likely to hit the 2% target until December 2020.

The RBNZ additionally left interest rates at 1.75% and Mr Orr confirmed that they would remain unchanged ‘for some time to come’.

The New Zealand Dollar might claw back lost ground against its peers this evening, when a business PMI reading for April will be released.

This measure is tipped to show rising activity, which might restore some confidence among NZD traders.

Canadian Dollar (CAD)

As with the Australian Dollar, the Canadian Dollar has greatly benefitted from US Dollar weakness seen today.

The CAD has advanced against all of its regular peers barring the Australian Dollar, which is currently the stronger of the two currencies.

The Canadian Dollar could make further gains on Friday when jobs market data for April is released.

Current estimates are for more people in full-time employment and a higher number of employed persons in general, although the actual unemployment rate isn’t expected to change from 5.8%.
As of Thursday, 10th May 2018, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1343, GBP USD exchange rate was 1.3519, GBP AUD exchange rate was 1.7951, GBP NZD exchange rate was 1.9397, and GBP CAD exchange rate was 1.726.

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