Sterling lost more ground today as the rate simmered just above the 1.16’s after a large drop this afternoon. This morning there was a drop in the unemployment rate for the UK however many sceptics suggested it will take time for the Brexit to influence the rate and a drop is coming. There hasn’t been much overly negative data since the Referendum with only small pockets suggesting much has changed.
Bank of England Monetary Policy Decision
Tomorrow the BoE will once again vote on the Interest Rate. In the last meeting the committee decided to perform a rate cut for the first time in several years cutting 0.5% to 0.25%. This was also accompanied with a £435 billion asset purchasing plan. Whilst the same drama surrounding the last decision is not expected tomorrow it is still very significant. There was talk that the bank had cut the rate early after there was better than expected news at the end of August however there is no chance of the bank reversing the decision.
What does seem more likely is that nothing will change with regards to the monetary and fiscal measures. However the minutes from the meeting will provide an insight into the thoughts of the committee members potentially giving hints as to the future plans.
In past experience the Bank of England has done very little to talk up Sterling and I would not be surprised to see further falls tomorrow. The bank has taken credit for avoiding a recession since the Brexit vote and I think this point will be re-affirmed tomorrow. Undoubtedly there will be mention that there should be patience with the economy with an emphasis on how fragile things are currently. However there will be a small amount of optimism followed begrudgingly by the bank suggesting that they have no alternative and will make the UK economy work.