The British pound to New Zealand dollar falls after unanimous vote from the BoE Sends Sterling Weaker.
On Thursday the Pound came under significant selling pressure against the major currencies after the Bank of England’s MPC voted unanimously to keep interest rates on hold at 0.5%.
Ian McCafferty, the sole voice within the BoE voting for a rate increase for the past six months, withdrew his recommendation as officials cut their UK growth and inflation forecasts.
Sterling weakened against 15 out of the 16 most actively traded currencies, as the decision to cut forecasts and leave rates unchanged is perceived as a dovish move by investors.
Here are some key fx rates for your reference;
On Saturday the Pound to British Pound exchange rate (GBP/GBP) converts at 1
The GBP to GBP exchange rate converts at 1 today.
The GBP to USD exchange rate converts at 1.249 today.
The GBP to AUD exchange rate converts at 1.911 today.
NB: the forex rates mentioned above, revised as of 27th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.
Concerns relating to the UK’s growth and inflation outlook saw the GBP/NZD exchange rate drop 0.2%
McCafferty’s withdrawal of his vote to raise rates is an indication of the bearish sentiment engulfing the UK economic and monetary outlook and Sterling’s weakness as a result is hardly a surprise.
The Pound has weakened almost 2% against the New Zealand Dollar this week, plunging to a new low of 2.1617 this morning and further broad losses are likely to follow.
The Governor of the BoE Mark Carney did his best to deliver a hawkish speech in the aftermath of the announcement, saying that the next likely move for rates is still up, but traders were far from convinced. He started by acknowledging the external risks that prompted officials to cut growth and inflation forecasts for the year.
Despite Carney’s bullish outlook for interest rates over the longer-term, it will still take a minimum of two years for consumer price inflation to return to target and the market is still thinking about the possibility of a cut in rates this year.
ECB, BoJ and Fed Policy Stances Inspire Euro, Yen and US Dollar Exchange Rate Movement
The Bank of England’s stance came against a backdrop of global policy divergence, with the Fed lifting rates in December, the Bank of Japan adopting negative rates and the ECB signaling its stimulus plan will be reviewed next month.
The bearish sentiment towards Sterling is evident all over the place and that’s without even mentioning the possibility of further substantial losses if the UK leaves the European Union. Goldman Sachs Group Inc have predicted that the Pound could fall by as much as 20% if Britain votes to leave the EU in the referendum.
Foreign Currency Exchange Forecast – Will GBP/EUR Fall to Worst Rate of 1.04?
To put that in some sort of context, the Pound would fall towards 1.04 against the Euro and 1.72 against the New Zealand Dollar. The U.S Dollar is heading for its worst weak since 2009 on a trade weighted basis but the Pound could drop as low as 1.20 over the next 12 months.
Quietly Expectant USD Ahead of Non-Farm Payrolls
The forthcoming release of the key US Non-Farm Payrolls has seen the US Dollar remain mostly weak today, although the high-risk New Zealand Dollar and the floundering Pound Sterling are both losing ground to it.
Experts are predicting 190k new jobs will have been created last month, while unemployment will stay level at 5%, although the past two high-importance US releases printing poorly has investors worried.
According to IG’s Angus Nicholson; ‘A big miss on the NFP numbers (150,000 or less) would see a further dive in the US dollar, killing expectations of any further rate hikes by the Fed.’
Data Released 5th February 2016
U.S 13:30 Non-Farm Payrolls (January)
- Unemployment
- Average Earnings
U.S 13:30 International Trade Balance (December)
U.S 20:00 Consumer Credit (December)
Update:
Although predicted to remain at 5.0%, US Unemployment has fallen to 4.9%, boosting the US Dollar exchange rate complex as joblessness hits an eight year low.
Non-Farm Payrolls printed under forecast at 151,00, but last month’s figures weren’t revised down as much as anticipated.