Pound’s slump in the wake of the publication of the Bank of England’s Inflation Report, the following reaction may be useful. David Lamb, head of dealing at FEXCO Corporate Payments, comments.
The Pound has been hit by a dovish double-whammy. The Monetary Policy Committee has returned firmly to type, with an increased number of the Bank’s rate-setting grandees voting for the dovish orthodoxy.
And with the Bank’s Inflation Report predicting both a slowdown in economic growth and continued rising inflation, the doves are now set to rule the roost for the foreseeable future. Translation – we shouldn’t expect an interest rate rise at least until the start of 2018.
The combination of these two signals from the Bank have hit Sterling like a bucket of cold water, and prompted the Pound to lose most of the gains it made against the Dollar earlier this week. Meanwhile it’s in full retreat against the Euro, sliding to its lowest level for nine months.
With the MPC so wary of derailing Britain’s fragile growth with a rate rise – and the Bank forecasting further economic weakness – the prospects of a rate hike have once again disappeared below the horison. Sterling’s brief spell of strength has sunk with them.
