Bank of England interest rate decision in focus as GBP declines
Daily Currency UpdateSterling declined over 1% this morning against the US dollar, in part due to recessionary fears in the UK. Today's Bank of England interest rate decision will be the main focus. The BoE is on track for its most significant interest rate rise in decades, as it tries to get a grip on high inflation.
The central bank is expected to raise its key interest rate by 75 basis points, taking the Bank Rate from 2.25% to 3%, the highest since autumn 2008, at one of the most eagerly anticipated monetary policy meetings for many years. It would be the eighth interest rate hike in a row, driving up borrowing costs as the country risks falling into recession. As a result, the pound is slipping this morning as Andrew Bailey’s commentary (the Governor of the Bank of England) is awaited.
A 75 basis-point rise would be the biggest rate hike since 1989, with the BoE determined to tighten monetary policy after seeing consumer price inflation hit a 40-year high of 10.1% in September, five times higher than its 2% target, driven by soaring food prices as well as the energy crunch.
Key MoversThe main headline from yesterday was that US Federal Reserve chair, Jerome Powell, announced a fourth consecutive 75 basis point rate hike, which pushed interest rates to 3.75-4.00%. Powell indicated that even though the pace of hikes may slow, they may continue for longer than previously expected, which is helping to drive US dollar demand. EUR/USD dropped below 0.98 and GBP/USD has now dropped to below 1.13.
- GBP/USD: 1.1205 - 1.1295 ▼
- GBP/EUR: 1.1475 - 1.1545 ▼
- EUR/USD: 0.9705 - 0.9795 ▼