Thursday, 30 June 2016

Pound plunges as BoE hints at rate cut

So much for the Bank of England supporting the Pound! The governor Mark Carney has just spoken and warned that interest rates could be cut next month due to the deteriorating economic outlook.  The rate has been at record lows of 0.5% for 7 years, and a lower rate that than means less return for investors, and so the currency weakens. You can clearly see how much the Pound weakened the moment he made the comments:

I must say that it's not very helpful him pouring oil onto the fire. I would not be surprised to see some criticism of what he's just done to the value of Sterling, when he should be looking to calm the markets, not increase an already volatile market. 

It was this low in the last week but recovered, but time will tell if the Pound will regain the hit it's taken today. It was sitting pretty steady at €1.21 against the Euro before Mark Carney's comments pushed it lower. They could cut rates either in the middle of July or in August.

Personally I think that the markets knew this was a likelihood anyway, and would expect the Pound to be back up above €1.20 by the close of play tomorrow, but let's see what happens.

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