Yesterday the Monetary Policy Committee of the Bank of England cut changed the base UK Interest Rate for the first time in 7 years. Although this move was expected Sterling exchange rates still dropped quite significantly as a more aggressive than expected financial stimulus package will be implemented.
Moving forward the BoE will inject an additional £435bn into the UK economy via its asset purchasing facility (mostly bonds).
This figure was an additional £60b greater than expected and resulted in the a boost to the UK’s main equity market, the FTSE 100 as additional spending is considered a bonus for UK shares, although the Pound dropped heavily of this news with GBP/USD dropping by as much as 200 pips in the immediate aftermath.
Later this afternoon we could experience another volatile afternoon of trading as NON-Farm Payroll figures are expected out of the States. The expectation is for 181k new jobs so expect movement within exchange rates should the figure sway from that expectation.
Moving forward I expect economic information out the UK to continue to drive Sterling’s value as investors continue to gauge the negative effects of the Brexit on the UK. Next Tuesday’s NIESR report looks at the last 3 months of growth within the UK and will provide a much fuller analysis of current conditions. Given the recent poor streak of PMI releases I’m expecting this release to provide further concerns surrounding the economy.
The Bank of England’s decision yesterday will take some time to filter into the economy and I would therefore expect further releases to bear a negative trend. If you have a currency transfer to attend to, doing so sooner rather than later should be considered.