Pound Euro Exchange Rates Dives to Two-Week Low Following BoE, ECB Rate Decisions

The Pound fell sharply against both the Euro and US Dollar today in the wake of the Bank of England’s (BoE) latest interest rate decision. 

While the BoE’s decision to raise rates by 50bps was in line with expectations, investors seem rattled by a dovish split within the Monetary Policy Committee. Two policymakers called for interest rates to remain unchanged. 

The split led some analysts to suggest UK interest rates could peak at 4% next year, versus the 4.5% forecast ahead of the meeting. 

In contrast the Euro is strengthening this afternoon after the European Central Bank (ECB) delivered its own interest rate decision. 

The ECB also opted for a 50bps hike this month. While this disappointed those holding out for another 75bps increase, EUR investors appear to have taken solace in some hawkish comments from President Christine Lagarde. Lagarde said it is ‘obvious that we should expect 50 bps hikes for a period of time.’ 

At the same time, the US Dollar is firming today. Bolstered by risk-off flows in the wake of the Federal Reserve’s interest rate decision on Wednesday. 

Matthew Andrews

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