Pound Sterling falls sharply after BoE Taylor’s dovish remarks
- The Pound Sterling declines sharply against its major peers, following BoE Taylor’s dovish comments.
- BoE’s Taylor sees two or three interest rate cuts before returning to the neutral level.
- The US Dollar recoups its early losses, driven by the US SC’s ruling against Trump’s tariffs.
The Pound Sterling faces selling pressure against its major currency peers during the European trading session on Monday after dovish comments on interest rates from Bank of England’s (BoE) Monetary Policy Committee (MPC) member Alan Taylor in a fireside chat at Deutsche Bank in London.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.01% | -0.05% | -0.08% | 0.00% | 0.16% | 0.13% | 0.15% | |
| EUR | -0.01% | -0.06% | -0.09% | 0.00% | 0.14% | 0.12% | 0.14% | |
| GBP | 0.05% | 0.06% | -0.02% | 0.08% | 0.19% | 0.17% | 0.20% | |
| JPY | 0.08% | 0.09% | 0.02% | 0.10% | 0.24% | 0.22% | 0.25% | |
| CAD | -0.01% | -0.00% | -0.08% | -0.10% | 0.15% | 0.12% | 0.14% | |
| AUD | -0.16% | -0.14% | -0.19% | -0.24% | -0.15% | -0.03% | -0.00% | |
| NZD | -0.13% | -0.12% | -0.17% | -0.22% | -0.12% | 0.03% | 0.02% | |
| CHF | -0.15% | -0.14% | -0.20% | -0.25% | -0.14% | 0.00% | -0.02% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The comments from BoE’s Taylor, who voted for a 25 basis points (bps) reduction in interest rates in the policy meeting earlier this month, express concerns over the United Kingdom’s (UK) economic growth, optimism about inflationary pressures returning to the central bank’s 2% target, and supports more interest rate cuts in the near term.
“I have become more reassured that we are proceeding towards inflation normalisation at a reasonable pace,” Taylor said. His confidence in inflation normalization is based on the expectation that “service price inflation to normalise along with wage growth this year”.
On the interest rate outlook, BoE’s Taylor has stated that risks are shifting to “lower inflation and higher unemployment”; therefore, “we [the BoE] might have two-three rate cuts to go before theoretical neutral level.”
Against the US Dollar (USD), the Pound Sterling has surrendered almost its entire early gains and has turned almost flat to near 1.3485.
Earlier in the day, the GBP/USD pair gained sharply as the US Dollar (USD) slumped due to the United States (US) Supreme Court’s (SC) ruling against President Donald Trump’s tariff policy.
During European trading hours, the US Dollar Index (DXY) has recovered its entire early losses on expectations that President Donald Trump has many alternatives to keep trade deals afloat.
BoE FAQs
The Bank of England (BoE) decides monetary policy for the United Kingdom. Its primary goal is to achieve ‘price stability’, or a steady inflation rate of 2%. Its tool for achieving this is via the adjustment of base lending rates. The BoE sets the rate at which it lends to commercial banks and banks lend to each other, determining the level of interest rates in the economy overall. This also impacts the value of the Pound Sterling (GBP).
When inflation is above the Bank of England’s target it responds by raising interest rates, making it more expensive for people and businesses to access credit. This is positive for the Pound Sterling because higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls below target, it is a sign economic growth is slowing, and the BoE will consider lowering interest rates to cheapen credit in the hope businesses will borrow to invest in growth-generating projects – a negative for the Pound Sterling.
In extreme situations, the Bank of England can enact a policy called Quantitative Easing (QE). QE is the process by which the BoE substantially increases the flow of credit in a stuck financial system. QE is a last resort policy when lowering interest rates will not achieve the necessary result. The process of QE involves the BoE printing money to buy assets – usually government or AAA-rated corporate bonds – from banks and other financial institutions. QE usually results in a weaker Pound Sterling.
Quantitative tightening (QT) is the reverse of QE, enacted when the economy is strengthening and inflation starts rising. Whilst in QE the Bank of England (BoE) purchases government and corporate bonds from financial institutions to encourage them to lend; in QT, the BoE stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive for the Pound Sterling.
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