Pound Pressured by Cautionary Comments

By: DailyForex.com

The Pound Sterling took a hard hit which brought the GBP/USD pair to below $1.50, a fresh 7-month trough. That low came after one policymaker from the Bank of England released a cautionary comment that investors took to heart. Gertian Vlieghe, of the BOE’s Monetary Policy Committee, said that the inflationary impact of a too strong Pound as a result of tightening was “huge.” Furthermore, he, in particular, would want to see stable or improving growth before he considered a rate hike. Though the Pound has been driven broadly lower as a result of the QE program initiated by the European Central Bank, Cable is still close to an 8-year peak against the greenback, on a trade-weighted basis.

As reported at 11:02 am (GMT) in London, the GBP/USD was trading at $1.5021, down 0.11%; the pair ranged from $1.5001 to $1.5051 in today’s trading session. The EUR/GBP was trading at 0.7041 Pence, down 0.06%; the pair is trading within a relatively narrow band of 0.7033 Pence at the low end and 0.7054 Pence at the high end.

Will the BoE Shadow the Fed?

In the near term, the Pound Sterling is likely to continue to be under pressure as a result of more easing from the ECB which could begin very shortly. However, one economist from Japan pointed out that the Bank of England has already taken into account a stronger Pound and its impact on the inflationary outlook. As a result, in comparison to the Federal Reserve, the BoE can afford to move gradually toward a tighter policy.

Barbara Zigah

After working on Wall Street, Barb began her second career as a freelance writer at Daily Forex, where the CEO recognized fresh, untapped potential and was willing to give her a try. She’s never looked back. Since then, she’s worked steadily as a freelance writer and editor in the financial services and Forex-related industry.