Excel Currencies Blog

6 out of the last 8 BoE meetings has seen the Pound drop in value. GBP has been in the red most of the week and a 0.5% fall today, came on the back of a 25bp interest rate hike by the central bank. The expected call was priced in at around 80% on markets with 20% for a 50bp call. The BoE split though was divided 6-2-1.

The issue with the split view is that it doesn't provide confidence to investors that the central bank know what it is going to take to bring inflation down to the 2% target. As it stands, £-€ has lost a clear 1% since the start of the week with the more volatile £-$ losing a bit more ground. Well done to those that hedged before today's risk event, as it was clear to us that today was a 'more to lose than gain' scenario, which has of course now come to fruition. 

The bank suggest they are no longer forecasting a recession this year, but the risk of one is still significant. A 0.5% expected growth rate this year is much better than the doom and gloom most had predicted for 2023. It's therefore crucial to look at the positive side of the story rather than the small growth figure, as things for consumers and the Pound could have been very different. 

More volatility is expected to come throughout the BoE meeting this afternoon and once the dust settles tomorrow/Monday..