Today financial markets are riveted to the event of great importance. The monetary policy committee of the UK’s central bank embarked on the crucial decision which triggered big moves in the currency market. The Bank of England decided to cut interest rates to a new historic low that was broadly in line with analyst expectations. However, traders gave an unpredictable response.
A round of weak macroeconomic data from the United Kingdom signaled a looming rate cut by the central bank. The Bank of England slashed its key rate to a new record low of 0.25% for the first time in more than seven years.
Importantly, the Bank of England softened monetary policy in light of Britain’s historical vote to leave the EU in June. Most experts are warning that the British economy will face strong headwinds from Brexit. Indeed, the latest PMIs on different sectors of the UK’s economy are viewed as the first evidence that Brexit is already having an adverse effect on the economy. All PMIs have dropped that indicates a highly probable slowdown in the UK’s economic growth.
For the time being, traders were in suspense. Today, they are giving preference to the US currency as the Bank of England announced its decisions.
Following the announcements, the pound/dollar pair fell sharply to intraday lows. The cable is currently trading at 1.3135. Currency strategists assume the pair is set for a long downtrend as investors are braced for further dismal performance of the British economy. This enhances the appeal of the US currency.
Bank of England Governor Mark Carney commented that the rate cut aims to stave off the worst fallouts of the predicted economic storm following the Brexit vote. Besides, the committee decided to expand quantitative easing. Mark Carney told reporters that the stimulus unveiled at the meeting is targeted at the UK domestic economy, not the exchange rate.

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