The Pound has lost some ground this afternoon after the latest Bank of England interest rate meeting.
Policymakers voted to increase the central bank’s bond buying (quantitative easing) by an extra £100 billion to help support the coronavirus-hit economy. They said they would spend this extra on government bonds and expect the new total target of £745 billion would be bought by the end of the year but at a slower pace. By purchasing government bonds they’re helping support the government’s enlarged borrowing requirements created by Covid-19 which also helps to keep borrowing costs down for businesses and consumers.
Initially the announcement strengthened sterling as their decision was slightly more hawkish (optimistic) than expected with some traders expecting a larger increase in stimulus. However, the market quickly turned negative on the Pound and it has been heavily sold back. Traders might feel that there is not as much support coming from the Bank of England as they would like or it’s just a ‘buy the rumour, sell the news’ move.
Either way, the GBP/USD is down 1% on the day and currently trades at the lowest levels of the month. The GBP/EUR is down 0.75% on the day and also at the lows for June.