Currency of U.K. Declines After BoE Split-Up Over Interest Rate Matter
Previously, the currency of the U.K. fell after a surprisingly split decision by the Bank of England. The decision was to retain current interest rates at 0.75 percent.
Meanwhile, sterling also fell to a two-week low. It was after two Bank of England (BoE) representatives all of a sudden voted to cut interest rates this month.
Moreover, others stated they would think about a cut if global and Brexit headwinds did not subside.
In a news report survey for a unanimous decision, the BoE stated that its nine-member Monetary Policy Committee voted 7-2. The voting was to keep its key rate at 0.75 percent.
So far, the central bank has refrained from following the United States Federal Reserve and the European Central Bank in cutting rates.
The avoidance was in response to Brexit disputes and a global slowdown initiated by a protracted US-China trade war.
In addition, the news took markets by shock, pushing sterling down versus its major rivals.
Pound Weakens Nearly Two Weeks
The United Kingdom’s currency dropped to its lowest point in nearly two weeks, down as much as $1.2794.
It was last set down 0.26 percent on the day at $1.2827. After plunging almost 0.4 percent in contrast to the euro following the BoE’s decision, the pound was flat versus the euro at 86.14 pence.
On the flip side, London’s benchmark FTSE 100 stock index was last ahead 0.13 percent. This was in line with a weaker pound. Other European markets also increased signs of development in US-China trade talks.
An FX strategist at Nomura in London, Jordan Rochester, said, “We have had some sterling underperformance, but the moves so far are relatively contained.”
He also added, “There have been a couple of times where dissenting BoE members get the markets excited, but actually the politics or the data changes the narrative.”
Lastly, Rochester indicated the big focus for currency traders. This will happen in next month’s quick parliamentary election. This is with ambiguity on that front likely to weigh on the pound.