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Pound slumps on interest rate talk
Published on 21.06.2017 15:29

The pound slumped to its lowest level today post-election, following on from yesterday’s losses after comments By BOE chief Mark Carney on the question of interest rates.

The British currency began its decline yesterday after Carney noted that the UK economy was not ready for higher interest rates and any such move could derail the fragile recovery.

That goes against some Bank of England board members who voted to hike interest rates last week but were defeated and it shows the deep divide on howc to go forward with monetary policy

"From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment." noted Carney.

Looking ahead, the outlook for the pound also looks dismal and further losses are expected on the back of political instability and with no government formed as yet, Prime Minister Theresa Mays job looks pretty shaky,

 “With no discernable progress yet in talks, the market is becoming worried about the prospect of a minority government and Ms. May’s ever-so-tenuous hold on power, just a Brexit talks have started this week, noted Boris Schlossberg, managing director of FX strategy at BK Asset Management.

“Sterling continues its slow motion crash, If “economic data starts to falter, the decline in cable could take it well below the key 1.2500 support level, he added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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