Pound softens after BoE meeting, but GBP/EUR gains on ECB inflation outlook

The latest Bank of England (BoE) monetary policy announcement contained nothing for markets to get excited about, but the pound was able to make sharp gains versus the euro and hold its ground versus the US dollar.

The pound is on weak form this morning. GBP/EUR has drifted lower to €1.1394, while GBP/USD is flat at US$1.3431. GBP/AUD has fallen -0.3% to AU$1.7469, GBP/NZD is down half a per cent at NZ $1.9118, and GBP/CAD has fallen -0.3% to C$1.7130.

It’s a very empty day today in terms of data, leaving the impact of yesterday’s decisions to cause movement on the foreign exchange market. Read on to find out what the central banks said…

What’s been happening?

It was a game of two halves for GBP/EUR yesterday, while GBP/USD managed to hold on to opening levels.

The latest Bank of England monetary policy meeting held little significance, with the Monetary Policy Committee (MPC) leaving the economic outlook unchanged.

None of the nine members of the MPC voted in favour of an interest rate hike.

With nothing of note to boost demand for the pound, Sterling dipped - although it recovered losses against the US dollar and was later able to jump higher versus the euro.

A disappointing meeting from European Central Bank (ECB) pushed the euro lower in the latter half of the day, even though the bank raised its growth forecasts.

Markets had hoped that the ECB would set an end date for the quantitative easing programme, but the latest statement on monetary policy showed that the Governing Council have kept the programme open-ended, while continuing to state that interest rates were unlikely to rise before asset purchases had been halted.

Meanwhile, GBP/USD was under pressure after strong US retail sales data from November.

Growth in advance retail sales accelerated from 0.5% - an upwards revision on the initial report figure - to 0.8%, beating economists’ expectations for 0.3%.

What's coming up?

It’s a very quiet end to the week in terms of data today.

The only UK development on the calendar is a speech from Bank of England Chief Economist Andy Haldane; he is known for his cautious approach to monetary policy, so if he says anything regarding interest rates it is likely to be something that weakens the pound.

News from the political sphere could keep Sterling on the move, however, as Prime Minister Theresa May continues her Brexit meetings with officials in Brussels.

Meanwhile the European data calendar contains only the Eurozone trade balance figures for November.

The US data calendar is marginally more exciting, containing the Empire manufacturing index, and industrial and manufacturing production figures.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.