Pound sterling experienced large sell offs yesterday as the Bank of England defied expectations and decided to keep interest rates unchanged at 0.1% during the November policy meeting, with a vote of 7-2 against a rate change.
GBP dropped 1.6% to 1.3471 against the USD, and 1.2% to 1.1675 against the EUR, both 5-week lows. The BoE indicated it could still raise interest rates in the near future, which could limit further declines for GBP, whilst downplaying the inflation concerns.
The BoE’s decision to delay raising interest rates appears to be based on the need to see how the labour markets performs following the end of the furlough scheme in September. The next unemployment figures are due out on November 16th and should show to what extent unemployment rose after the government ended paying firms to keep employees on their payroll.
The next BoE meeting is in December and a rate hike will remain odds on should the labour market provide more robust than expected.
EUR-USD dropped to 1.1542 yesterday, not far from this year’s low of 1.1523. The US Nonfarm Payrolls figures are released at 12:30, a strong figure could help extend the dollar’s upsurge and test the 2021 low.
Have a good day.
Joseph Sidders, Relationship Manager.
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