GBP Exchange Rate Plummets Today Following BoE Inflation Report
The Pound to Euro exchange rate is presently slumping, residing in the region of 1.2526 following a three day gaining streak Sterling made against the Single Currency. This session has seen the Pound reach its pinnacle at 1.2602 whilst also dipping to its lowest point at 1.2521.
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Conversely the Pound to US Dollar (USD) currency pairing is presently trading in the region of 1.6728, hovering just slightly above the session low of 1.6726 falling to a two-month low; residing far from the highest GBP to USD exchange rate today of 1.6842.
However the Pound has fallen against other majors following the highly influential UK Inflation Report released today which had hoped would prove upbeat for the softened Pound.
The Pound is highly influenced by the Inflation Report today which has suggested that Governor for the Bank of England (BoE), Mark Carney, has indicated that he and the other members of the Monetary Policy Committee (MPC) expect interest rate hikes to commence in the first quarter of 2015.
The Inflation Report stated: ‘In light of the heightened uncertainty about the current degree of slack, the committee noted the importance of monitoring the expected path of costs, particularly wages, in assessing inflationary pressure.’
Furthermore this statement arrived after the UK published figures for the Average Weekly Earnings which fell by -0.2% in June, despite only being forecast to dip by -0.1%. Furthermore the UK Employment Change figure showed only 167K new positions filled, significantly short of the 270K economists had expected. Subsequently, following the release of the data the Pound has plummeted significantly to its lowest point so far this session.
The Bank of England have cut their expectations for wage growth in the UK, dampening investors sentiment in the Pound. Speculation had been rife in the currency market that interest rate hikes before Christmas would materialise, with today’s news being a disappointment to many.
However, the currency market has been eagerly anticipating the outcome of the vote for interest rate hikes in the UK which once again proved unanimous.
The Inflation report stated: ‘Although the domestic economy was growing at or above longer-term average rates, there was little indication of inflationary pressures building and there was uncertainty as to whether there had been more structural change in the relationship between the labour market and inflation; a premature tightening in monetary policy might leave the economy vulnerable to shocks… against that backdrop, the MPC voted unanimously to maintain Bank Rate at 0.5%.’
Carney has proved unpredictable in the past with his conflicting statements regarding interest rate changes in the UK. Expert in the field Lee McDarby commented: ‘Since his Mansion House speech, Carney may be quite conscious of the power of his hawkishness. We are seeing this come through now as he makes references to not wanting to rock the boat of UK recovery.’
For now the Pound appears to be on a downward trajectory in the currency market with the Pound to Euro and Pound to US Dollar exchange rates taking a noticeable hit.
At present the Euro is trading up against the Pound at 0.7977, whilst the USD to GBP exchange rate currently resides at 0.5967.