British Pound (GBP) Exchange Rate weaker against Euro, US Dollar after BoE Minutes
The British Pound was trading weaker against the majority of its major peers on Wednesday after Junes Bank of England policy meeting minutes weighed upon demand for the currency.
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The Bank of England minutes disappointed economists as they were less hawkish than economists had been hoping.
Investors had been expecting the Central Bank’s policy makers to show some disagreement as to whether to leave interest rates unchanged at the record low level of 0.5% this month.
Instead the minutes showed that policy makers were unanimous in their support leaving rates unchanged.
The minutes also showed that a rate hike is dependent on an improvement in the UK’s inflation and wage growth rate. Both of those figures have disappointed in recent weeks with inflation falling to a four-year low yesterday.
Economists are split over when rates will rise, after digesting a set of minutes that show widening splits at the BoE over the amount of spare capacity in the labour market.
The minutes dented some of the expectations for a rate hike created last week by a speech by BoE Governor Mark Carney which hinted that interest rates could rise sooner than investors expect.
His comments had strengthened the Pound as investors raised their bets that a rate hike could occur as soon as this year.
Highlighting how economists are split one economist said; “The first rate increase will have to be in November or December to avoid the MPC looking foolish over forward guidance.”
Another said; “The very benign outlook for inflation makes it far from certain that rates will rise.”
As a result of the minutes the British Pound fell back from a five-year high against the US Dollar and weakened against the Euro and other major currencies.
The British Pound is currently trading against the Euro in the region of 1.2480 and trading against the US Dollar in the region of 1.6944.