Pound falls sharply after BoE's 'Super Thursday'

The Pound has fallen sharply today after various information released by the Bank of England’s ‘Super Thursday’. As you can see from the chart below Pound/Euro rates have fallen from €1.42 to €1.40. In today’s post I’ll explain why this has happened.

Why has the Pound/Euro rate fallen so much?

In yesterday’s post I outlined why ‘Super Thursday’ was going to be such an important event and I cited 3 things to look out for:

The minutes to the meeting – this showed that it was again only 1 member voted for a rate rise. There was speculation a few other members might vote, but this was not the case and the Pound weakened.

The inflation report – This showed "the outlook for global growth has weakened since August". It blamed emerging market economies for that weakness, saying growth in those regions had "slowed markedly". This also means UK growth forecasts are now lower, weakening Sterling.

Mark Carney’s Speech – He said that the weakness of the global economy, particularly emerging markets, has made the Bank of England cautious about the outlook for inflation. In turn, this means that it is now likely the latter part of next year before interest rates would rise.

Summary for those looking to buy Euros at the best rates

All in all, this was a very dovish outlook from the central bank, and the currency markets have reacted accordingly and the Sterling exchange rates have dropped. Those that read my report yesterday and placed ‘Stop Loss’ orders in advance of today’s announcement will have limited their losses. Those that simply watched and hoped rates would remain supported will now face getting a much lower exchange rate than was necessary.

I don’t think we’ll see rates recover now that the Pound is likely to remain weak well into next year. However, despite the drop today, rates to buy Euros are still very good. Last month the GBP/EUR rate was as low as 1.3350 and the current levels are still quite close to an 8 year high. I’ve been saying for some time the Pound was probably slightly overvalued and today has seen a correction in prices. I wouldn’t be surprised to see rates fall further in the coming weeks.

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Labels: Bank of England, Best Exchange Rates, currency forecast, GBPEUR, Inflation, Interest Rates, Super Thursday, When to Buy Euros, Why has Pound fallen against Euro