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Pound Dives Versus Aussie Dollar (GBP/AUD) as BoE Keeps Rates on Hold

04 August 2017 by FC Exchange

The pound took a dive in Thursday’s European session allowing other currency majors to gain against it after the Bank of England’s (BoE) interest rate decision. The British currency reacted badly when only two policymakers voted in favour of interest rate hikes following the departure of hawkish Monetary Policy Committee (MPC) member Kristin Forbes. The vote came in at 6-2 to leave interest rates unchanged.

In the follow-up press conference, BoE Governor Mark Carney suggested that in the next three years there would need to be tightening of monetary policy and two rate hikes would most probably be insufficient.

Speculation had been rising on whether the BoE would soon be introducing Britain to higher interest rates once again since slashing them after the Global Financial Crisis struck. In recent months, more BoE representatives have been commenting on the possibility of needing higher rates. However, the increase didn’t materialise and both the meeting minutes and Governor Carney seemed to warn about the risks of Brexit.

UBS interest rate expert John Wraith stated: ‘There had been some speculation over recent days that Andy Haldane might join them, but as we pointed out in a recent report, all of the reasons he gave for not voting for a hike in June remain valid – anaemic wage inflation, the risk of the economy growing more slowly than the BoE expects, and the threat to consumer confidence posed by a fragile and uncertain political landscape – and it always looked unlikely to us that he would change his vote at this time.’

Additionally, the Bank of England downgraded its growth expectations for 2017, lowering them from 1.9% to 1.7%.

The pound to Australian dollar (GBP/AUD) exchange rate is currently trending in the region of 1.6491.

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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