Pound punished by “dovish hold”

May 10, 2018 08:48 AM

The Pound has suffered steep losses once again against the dollar and other major counterparts on Thursday after the Bank of England (BoE) kept interest rates unchanged as expected.

The catalyst behind the latest round of punishment for the Sterling was likely the BoE trimming down its inflation targets, although lowering growth forecasts until the end of next year has also not helped investor sentiment. Both factors combined are likely to lead to UK interest rate expectations being even further pushed back.

Inflation is now expected to slow to its 2% target faster than anticipated, providing less reason to believe that the BoE will be in a hurry to raise UK interest rates.

Although Carney appeared more upbeat during the press conference than might have been expected, this did little to help the battered Pound.

Overall and despite the expectations for a UK interest rate increase being minimal following the reversal over the past month, spectators are viewing the conclusion of today’s meeting as a “Dovish Hold”. The likelihood moving forward is that investors are going to continue to remain suspicious over whether the BoE will raise UK interest rates this year, meaning that the Pound is likely to be at threat to further pain as a result.  

About the Author

Lukman Otunuga is an FXTM research analyst