{"id":3555,"date":"2017-05-11T00:00:00","date_gmt":"2017-05-11T04:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100017-pound-reacts-poorly-boe\/"},"modified":"2017-05-11T00:00:00","modified_gmt":"2017-05-11T04:00:00","slug":"100017-pound-reacts-poorly-boe","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100017-pound-reacts-poorly-boe\/","title":{"rendered":"GBP\/EUR Pound Reacts Poorly as Bank of England Cuts Growth Forecast"},"content":{"rendered":"<p>The pound had been increasing in value versus the euro since the French elections at the weekend, with the pound euro exchange rate reaching its highest level in three weeks yesterday (May 11th) at 1.1894. However, as the Bank of England released its decision on interest rates and the quarterly inflation report, the pound fell sharply, reaching a low of 1.1839.<\/p>\n<p>There was no surprise when the Bank of England announced it will be keeping interest rates on hold at the historically low level of 0.25%. However, the downward move by sterling was surprising given that the Bank of England also said that interest rates may actually rise faster than what the City is currently expecting. It\u2019s worth remembering that higher interest rates tend to attract more foreign investment, which increases the demand for the home currency and pushes the value of that currency higher. So, comments about a faster pace of hikes from the BoE would be expected to boost the value of the pound.<\/p>\n<h3><a href=\"#sterling-investors-could-have-been-looking-for-more-votes-in-favour-of-a-hike\" name=\"sterling-investors-could-have-been-looking-for-more-votes-in-favour-of-a-hike\"><\/a>Sterling investors could have been looking for more votes in favour of a hike<\/h3>\n<p>Yet despite these comments sterling traders were wanting to sell sterling, perhaps they were expecting a stronger hint from the central bank about when interest rate hikes would begin. Or they may have been looking for a second committee member to join Kristen Forbes in voting for a rate hike. Of the eight members of the Bank of England committee that decide the interest rate, only Kristen Forbes, voted to increase rates, whilst the other 7 voted for no change. There had been some speculation that committee member Michael Saunders would also vote to hike interest rates after he gave a speech in April which was supportive in tone to an increase but the fact that he wasn\u2019t could be keeping the pound low.<\/p>\n<h3><a href=\"#boe-cuts-growth-forecast-how-does-this-affect-the-value-of-the-pound-\" name=\"boe-cuts-growth-forecast-how-does-this-affect-the-value-of-the-pound-\"><\/a>BoE cuts growth forecast, how does this affect the value of the pound?<\/h3>\n<p>Finally, the quarterly inflation report exasperated any sell off in the pound, as the BoE cut its forecast for economic growth for this year. Meanwhile inflation is also set to tick up to 2.8% this year, whilst wages are only set to grow 2%, which is a decline in real terms. As a result, households in the UK will be under immense pressure and are likely to rein in their spending, likely pushing any possibility of an interest rate hike further down the road. Lower interest rates mean less foreign investment, which creates a lower demand for the currency and therefore a lower value for the currency.<\/p>\n<p><small><em><br \/>\nThis publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Inc., Currency Live or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. Consult our <a href=\"https:\/\/currencylive.com\/risk-warning\/\">risk warning<\/a> page for more details.<\/em><\/small><\/p>\n<p><small><em>This article was initially published on TransferWise.com from the same author. The content at Currency Live is the sole opinion of the authors and in no way reflects the views of TransferWise Inc.<\/em><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The pound had been increasing in value versus the euro since the French elections at the weekend, with the pound euro exchange rate reaching its highest level in three weeks yesterday (May 11th) at 1.1894. However, as the Bank of England released its decision on interest rates and the quarterly inflation report, the pound fell [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":3556,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379],"tags":[1394],"class_list":{"0":"post-3555","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-gbp","8":"tag-gbp"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.6 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GBP\/EUR Pound Reacts Poorly as Bank of England Cuts Growth Forecast - Currency Live<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/currencylive.com\/news\/100017-pound-reacts-poorly-boe\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fiona Cincotta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"3 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100017-pound-reacts-poorly-boe\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100017-pound-reacts-poorly-boe\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/EUR Pound Reacts Poorly as Bank of England Cuts Growth Forecast\",\"datePublished\":\"2017-05-11T04:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100017-pound-reacts-poorly-boe\\\/\"},\"wordCount\":588,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100017-pound-reacts-poorly-boe\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100017-pound-reacts-poorly-boe.jpg\",\"keywords\":[\"gbp\"],\"articleSection\":[\"GBP\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2017\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100017-pound-reacts-poorly-boe\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100017-pound-reacts-poorly-boe\\\/\",\"name\":\"GBP\\\/EUR Pound Reacts Poorly as Bank of England Cuts Growth Forecast - 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