British pound fell against euro and dollar after BoE’s decision on stabilizing interest rates

British Pound on first day of 2017

Pound sterling slipped as much as 1 percent versus the euro last Thursday and is now on track on a nine-month low. This is driven by the decision of the Bank of England (BoE) to lower its expectation for growth, wages and inflation along with keeping its rates as it is.

The British pound dropped more than 90.485 pence per euro which is considered its weakest level since November 2016 following the statement of BoE Governor Mark Carney in a press conference that there possibilities that business investments will be badly affected by Britain’s exit to the EU. Sterling also lost a cent versus the U.S. dollar of $1.3113.

Carney and his top officials also emphasized the likelihood of lifting borrowing costs as much as what investors expected over the next three years. However, markets are keeping a closer look on the movement of the Bank in terms of lowering its growth predictions for 2017. BoE forecasted a 1.7 percent growth this month, lower compared to its May predictions of 1.9 percent.

The bank also lowered its projection on inflation, with around 3 percent last October versus its forecast today with only 2.6 percent. Hedge fund FX sales at Mizuho Neil Jones said the 6-2 vote was highly expected but the less-hawkish inflation and growth predictions came in as a surprise to the markets.

Even though several economists are affiliated in a Reuters poll that predicted a 6-2 vote to maintain interest rates, some are considering that economist Andy Haldane could take part for those who are calling an abrupt increase.


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