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Pound Sterling & Euro Sink on Policy Statement
Published: 5 Jul at 9 AM Tags: Pound Sterling, Euro Exchange Rate, Dollar Exchange Rate, Euro Crisis, UK, Economy, Inflation,
Having risen for three straight days on the back of better than expected UK economic data, the pound fell sharply yesterday afternoon after the latest monthly policy announcement from the Bank of England (BoE), the first under the auspices of new Governor Mark Carney.
As expected, the BoE kept both its benchmark interest rate at its historic 0.5% low and the asset purchase programme, commonly known as Quantitative Easing (QE) at £375 billion, unchanged but in an immediate departure from Sir Mervyn King’s days, the BoE released a statement alongside the decision in an effort to provide some ‘forward guidance’ for the market.
The market immediately interpreted the BoE's statement to be dovish, especially due to the published view that "the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy".
The BoE also committed to providing an "assessment, alongside its August Inflation Report, of the case for adopting some form of forward guidance, including the possible use of intermediate thresholds."
Later on yesterday afternoon it was the turn of the policymakers at the European Central bank (ECB) to make their monthly policy announcement.
Again, as expected, the ECB kept its benchmark interest rate unchanged but ECB President Mario Draghi announced that euro zone interest rates would stay low "for an extended period of time".
He said the ECB's unprecedented forward guidance was designed to "inject a downward bias for interest rates for the foreseeable future".
Ahead of the publication later today of the key unemployment data out of the US, the dollar made strong gains against both the pound and the euro after yesterday’s policy announcements.
As expected, the BoE kept both its benchmark interest rate at its historic 0.5% low and the asset purchase programme, commonly known as Quantitative Easing (QE) at £375 billion, unchanged but in an immediate departure from Sir Mervyn King’s days, the BoE released a statement alongside the decision in an effort to provide some ‘forward guidance’ for the market.
The market immediately interpreted the BoE's statement to be dovish, especially due to the published view that "the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy".
The BoE also committed to providing an "assessment, alongside its August Inflation Report, of the case for adopting some form of forward guidance, including the possible use of intermediate thresholds."
Later on yesterday afternoon it was the turn of the policymakers at the European Central bank (ECB) to make their monthly policy announcement.
Again, as expected, the ECB kept its benchmark interest rate unchanged but ECB President Mario Draghi announced that euro zone interest rates would stay low "for an extended period of time".
He said the ECB's unprecedented forward guidance was designed to "inject a downward bias for interest rates for the foreseeable future".
Ahead of the publication later today of the key unemployment data out of the US, the dollar made strong gains against both the pound and the euro after yesterday’s policy announcements.
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Source: moneytransfer.co.uk